PERFORMANCE RIGHTS IN SOUND RECORDINGS

HEARINGSBEFORE THE

SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES,AND THE ADMINISTRATION OF JUSTICE

OF THE

COMMITTEE ON THE JUDICIARYHOUSE OF REPRESENTATIVES

NINETY-FIFTH CONGRESS

SECOND SESSION

ON

PERFORMANCE RIGHTS IN SOUND RECORDINGS

Z68- to

MARCH 29, 30, MAY 24 AND 25, 1978

Serial No. 83

printed for the use of the Committee on the Judiciary

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1978

#5c2/- I

COMMITTEE ON THE JUDICIARYPETER W. RODINO, JR., New Jersey, Chairman

JACK BROOKS, TexasROBERT W, KASTENMETER, WisconsinDON EDWARDS, CaliforniaJOHN CONYERS, J, MichiganJOSHUA EILBERG, PennsylvaniaWALTER FLOWERS, AlabamaJAMES R. MANN, South CarolinaJOHN F. SEIBERLING, OhioGEORGE E. DANIELSON, CaliforniaROBERT F. DRINAN, MassachusettsBARBARA JORDAN, TexasELIZABETH HOLTZMAN, New YorkROMANO L. MAZZOLI, KentuckyWILLIAM J. HUGHES, New JerseySAM B. HALL, Js., TexasLAMAR GUDGER, North CarolinaHAROLD L. VOLKMER, MissouriHERBERT E. HARRIS II, VirginiaJIM SANTINI, NevadaALLEN E. ERTBL, PennsylvaniaBILLY LEE EVANS, GeorgiaANTHONY C. BEILENSON, California

ROBERT McCLORY, IllinoisTOM RAIISBACK, IllinoisCHARLES E. WIGGINS, CaliforuiaHAMILTON FISH, JR., New YorkM. CALDWELL BUTLER, VirginiaWILLIAM S. COHEN, MaineCARLOS J. MOORHEAD, CaliforniaJOHN M. ASHBROOK, OhioHENRY J. HYDE, IllinoisTHOMAS N. KINDNESS, OhioHAROLD S. SAWYER, Michigan

ALAN A. PARKER, General CounselGARNER J. CLINE, Staff Director

FRANKLIN G. POLK, Associate Counsel

SuBcoMMTTEE ox COURTS, CIVm LiBETrFs, AND THE ADMINISTRATION OF JUSTICE

ROBERT W. KASTENMEIER, Wisconsin, Chairman

GEORGE E. DANIELSON, CaliforniaROBERT F. DRINAN, MassachusettsJIM SANTINI, NevadaALLEN E. ERTEL, Pennsylvania

TOM RAILSBACK, IllinoisM. CALDWELL BUTLER, Virginia

Baucz A. LEHMAN, Chief CounselTIMOTHY A. BoGOs, Professional Staff Member

THoMAs E. MOONEY, Associate Counsel

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CONTENTS

Hearings held as*

March 29, 1978 ------------------------------------------------- IMarch 30, 1978 ------------------------------------------------ 67May 24, 1978 -------------------------------------------------May 25, 1978 ---------------------------------------------------- 169

Witnesses

Allen, Nicholas, Amusement and Music Operators Association-......--__ 67Baumgarten, Jon A., Copyright Office -------------------------------- 112Bayliss, John, Radio Division Combined Communications Corp --------- 77Biddle, Hon. Livingston L., Jr., National Endowment for the Arts ------- 169

Prepared statement ------------------------------------------- 177Bikel, Theodore, American Council for the Arts ----------------------- 44Bostick, Charlotte, Copyright Office -------------------------------- 112Brown, Ray ----------------------------------------------------- 2Davis, Willie, National Association of Broadcasters -------------------- 27Dimling John, National Association of Broadcasters ------------------ 27Ewing, ky P., Jr., Deputy Assistant Attorney General Antitrust Division,

D epartm ent of Justice - - .............................. 161Prepared statement ---------------...------------------------- 161

Farrell, Joseph, American Council for the Arts ........- 44Fitzpatrick, James, Arnold & Porter- ------------------------------ 85Fleishman, Earnest Los Angeles Philharmonic-------------------------44Fuentealba, Victor, American Federation of Musicians ----------------- 2Gabbert,-James, National Radio Broadcasters Association -------------- 77Gilstrap, Jim ---------------------------------------------------- 2Golodner, Jack, AFL-CIO Department for Professional Employees ------ 2Gortikov, Stanley, Recording Industry Association of America- --------- 85Haas, Jim ------------------------------------------------------- 2Johnson, Nicholas, National Citizens Communications Lobby ------------ 58Katz, Richard J., Copyright Office ---------------------------------- 112Livingston, Alan, Entertainment Group of 20th Century Fox Records. 85Martindale, Steve ------------------------------------------------ 44MIigden Chester, Screen Actors Guild -------------------------- ----- 64Miles, Tichi Wilkerson, Hollywood Reporter -------------------------- 44Moss, Jerry, A & M1 Records --------------------------------------- 85Newell, Peter, Southerm California Broadcasters Association---------- 27Nolan, Kathleen, Screen Actors Guild-------------------------------57Norman, Gene, Crescendo Records--------------------------------- 85Oler, Harriet, Copyright Office -------------------------------------- 112Palance Lou --------- -- --------------- 2RaybalIf, Joe, Massachusetts Association of Broadcasters - .........- 27Ringer, Barbara, U.S. Register of Copyrights and Assistant Librarian of

Congress for Copyright services --------------------------------- 112Prepared statement ------------------------------------------- 112

Short, Major, National Association of Broadcasters -------------------- 27Smith, Joe, Elektra Asylum Records --------------------------------- 85Stewart, Stephen, International Federation of Producers of Phonographs

IFPI ---------------------------------------------------------- 85Tarlov, Mark, Antitrust Division, Department of Justice- ------------- 161Venters Carl, National Association of Broadcasters -------------------- 27Wade, hobert, National Endowment for the Arts --------------------- 169Werner, Stephen M., Ruttenberg & Associates ----------------------- 112Wiener, Louise, Special Assistant to the Secretary of Commerce for Cul-

tural Resources ------------------------------------------------ 179Wolff Sanford, American Federation of Television and Radio Artists,

A F r R A ------------- -------------------------------------------- 2(I1)

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IV

ADDITIONAL STATEMENTSPae.

American Broadcasting Companies, Inc ----------------------------- 185American Federation of Musicians American Federation of Television and

Radio Artists and Recording Industry Association of America, Inc-. 188The Roper Organization, Inc., A Research Proposal ------------------- 192

PERFORMANCE RIGHTS IN SOUND RECORDINGS

MARCH 29, 1978

HOUSE OF REPRESENTATIVES,SUBCO3MI3rEE ON COURTS, CIVIL LIBERTrES,

AND THE ADMINISTRATION OF JUSTICEOF TITE COMMTTEE ON TIE JUDICIARY,

Beverly 1ti18, Calif.The subcommittee met, pursuant to notice at 9:30 a.m. in the Royal

Suite of the Beverly Hilton Hotel, Beverly Hills, Calif., Hon. RobertW. Kastenmeier (chairman of the subcommittee) presiding.

Present: Representatives Kastenmeier, Danielson, Railsback, andCohen.

Also present: Bruce A. Lehman, counsel, Timothy A. Boggs, pro-fessional staff member, and Thomas E. Mooney, associate counsel, andAudrey Marcus committee staff.

Mr. KASTE-mEIER. The committee will come to order.Let me extend a welcome to our witnesses and those of you in the

audience this morning on the occasion of this our opening day of hear-ings on the question of performance rights in sound recordings.

May I say at the outset, that in accordance with House rules withoutobjection photographs or any other pictures may be taken during thecourse of the hearings.

The subcommittee is very pleased to be here in 6ne of the Nation'scenters, along with New York City, of the music, recording industry.These two geographical areas are those most affected, prospectively,by the proposals for a performance right in sound recordings.

With me this morning is the ranking minority member, Tom Rails-l)ack, a Member of Congress from Illinois who's been a member of thesubcommittee for many years. We're also very pleased to have Con-gressman Bill Cohen, a member of the Judiciary Committee who for-merly served on this subcommittee while we were taking up copyrightquestions several years ago. Also to be with us shortly is our colleagueGeorge Danielson from the Greater Los Angeles-area who has offereda legislative proposal for a performance right in sound recordings.I expect him to arrive with us shortly.

Nearly 2 years ago this subcommittee began the process of markinglip one of the most complex pieces of legislation in-my memory. theCopyright Revision Act of 1976. It had a long prior history. Goingback to at least 1962 when this subcommittee suspended the expirationof subsisting cop)yrights pending the enactment of a general revisionbill. In 1965 we had hearings; I chaired those hearings. In 1966 wehad markup. In 1967 we passed the bill which only became law ulti-nmitely when the Senate and the Ifouse were able to get together inc,)i7mion agreement in 1976.

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One of the questions or controversies, if you will, that was left unre-solved among the many that were resolved, was that of performancerights in sound recordings. And there have been proposals calliaig forthis over the years. Certainly, I remember the proposalway back in1965. It took somewhat of a different form than the present proposal,but in order to expedite the revision, the general revision in 1976, wespecifically put aside that subject and called on the Register of Copy-rights, Barbara Ringer, to report back to the Congress, by January 3of this year so that we might further consider the subject.

The Register has issued a report, but even as January 3 came aroundit was difficult for her and for all those reporting to her to fully re-spond as of ,January 3. As a matter of fact, the Register has not vetbeen able to testify before this subcommittee on the subject yet. So thiis,in fact, opens the hearings on the subject. The Register "will testifyat a later date. Ilowever, these hearings in California must be consid-ered the fundamental hearings on the subject in the year 1978. TheRegister, of course, will testify in Washington, and possibly therecould be some supplementary hearings, but that which is testified tothis morning will constitute our principal source of information onthe subject.

I had hoped to call on George Danielson at this point for a few re-marks, and I'm sure when he comes we can perhaps permit him tomake the remarks he desires to make on the subject since he is a pro-poser of a bill on the question. But we (to have many witnesses, and inorder that we may proceed expeditiously, I would now like to call onour first panel of witnesses. I would urge witnesses generally to be asconcise as possible, and in some cases you may have long,'extendedtestimony which is necessary for the record. It may be submitted forthe record, but you yourself may orally abbreviate your remarks sothat we can get to the nub of the matter without impinging on otherwitness' time.

This morning I'm very pleased to call on our first panel. The firstpanel of witnesses include Jack Golodner of the AFL-CIO; VictorFuentealba, president of the American Federationof Musicians; andSanford Wolff, American Federation of Radio & Television Artists.Gentlemen, you are most welcome.

TESTIMONY OF JACK GOLODNER, AFL-CIO DEPARTMENT FOR PRO-FESSIONAL EMPLOYEES, ACCOMPANIED BY VICTOR FUEN-TEALBA, AMERICAN FEDERATION OF MUSICIANS, AND SANFORDWOLFF, AMERICAN FEDERATION OF TELEVISION & RADIO ART-ISTS, RAY BROWN, LOU PALANCE, JIM GILSTRAP AND JIM HAAS

Let me call first, as our opening witness, .Jack Golodner.Mr. GoioN-ER. Thank you, Mr. Chairman. I am the director of the

department for professional employees of the AFL-CIO, and asyou've indicated I'm joined here this morning by Mr. Victor Fuen-tealba, president of the American Federation of Musicians and Mr.Sanford Wolff, the executive secretary of AFTRA, the AmericanFederation of Television & Radio Artists. With them, also, Mr. Chair-

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man, are several members of these two unions, and perhaps for therecord before I begin my prepared statement it would be wise to havethese two gentlemen introduced to the members who are accompany-ing them for the record.

Mr. KASTENMEIER. Yes, if you would.Mr. GOLODNER. Yes, Mr. Chairman. To my left is Mr. Ray Brown,

and to his left, Mr. Louis Palance, both members of the AmericanFederation of Musicians. At the far right is Mr. Jim Gilstrap, and tohis left, Mr. Jim Iaas, both active singers here in the Los Angelesarea.

Mr. KASTENMEIER. Thank you.Mr. GOLODNER. Mr. Chairman, you've described for us the work of

your committee for a number of years which culminated in 1976 inthe copyright revision. I would like to extend to you and your com-mittee the congratulations of our department and of the AFL--CIO. Idon't think too many people realize the extent of the work that hadto go into that. That was our Nation's first revision of the copyrightlaws since 1929. I'm talking about a complete overhaul. It was a greatjob, and you did a great public service. We wish to recognize it.

I appear here today to register the support of the department forprofessional employees and of the AFL-CIO itself for the principleof copyright protection for the public performance of sound record-ings. I know that the AFL--CIO needs no introduction, but perhapst;i6 department for professional employees does.

Our department comprises 26 national and international unionswhich represent approximately 1.5 million people employed in everymajor professional field. I appended to my statement a list of those26 international organizations.

Mr. KASTENMEER. Without objections, Mr. Golodner, the appen-dixes will be made a part of the record.

Mr. GOLODNFE. Thank you, Mr. Chairman.The department is the largest interdisciplinary organization of pro-

fessional people in the country. Among these people are engineersand teachers, nurses and doctors, social workers and pharmacists aswell as actors, singers, dancers, and musicians.

With regard to the issue before this subcommittee, our departmentmust be, and is, concerned with the interests of both the creator ofrecorded works and those who e:-joy them. We perceive these inter-ests as being wholly compatible. And so did the author-of our Con-stitution. They knew that in order for the Nation to benefit from thetalents of its inventors, authors and artists, these creative, uniquepeople must be encouraged and assured of a just reward for theirefforts.

The Bible, after all, warns us not to "muzzle the ox that treadeth outthe corn," (I Timothy 5.18) and our forefathers knew their Bible.Perhaps because we are no longer an agrarian society, the meaningof this quotation has not been lost, at least insofar as the arts are con-cerned. We seem to have forgotten that it is the artists, not the ma-chines, that are ultimately responsible for the benefits we derive fromthe lively arts and, having forgotten, in various ways we muzzledthem.

For years, jukebox operations were regarded by Congress as aninfant industry requiring encouragement and exemption from copy-

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right law. The needs of composers and musicians were ignored whilethe infant was nurtured. In time, tens of thousands of musicians lost-their jobs in restaurants, cabarets, dancehalls, and countless othersites. Then, as technology perfected both broadcasting an(r the soundrecording, the two were linked.

When America's musicians pointed out that the unlimited use ofsound recordings in broadcasting would destroy opportunities forthousands of talented artists, the industry cried for special protec-tion, amd Congress complied with the infamous Lea Act which im-poses criminal penalties on artists who would dare question the useof sound recordings on the air through the collective bargainingprocess.

Within a few years, every station in the country, granted monopolis-tic conditions by government and special dispensation from our laws,dispensed with live music. Again, thousands of musicians and singersbecame unemployed. The pool of creativity in America was diminished,and the potential of America's cultural contribution to the world some-what lessened. After more than a half century catering to the con-cerns of those who exploit recorded performances, the time is over--due for our government to-attend to the needs of those who createthese performances.

It, today, is the performing artist who coi:,es before Congress andasks not for special protection or consideration, but only for what isjust, fair, and equitable.

The performers' plea is just because it asks simply that Congressgive to them some of the rights it has already granted to other crea-tive people and for the same reasons. The Congress and the courtshave determined that a sound recording is a "writing" and copyright-able under the Constitution. Who, then, we ask is the author of thisright? This committee has received innumerable testimonials by ex-perts-illustrious conductors, musicologists, the Register of Copy-rights, the Chairman of the National Endowment for the Arts, evenrepresentatives of the broadcasting industry-attesting to the factthat the performer's contribution to the recording demonstrates auniqueness, originality, and creativity of the kind protected under thecopyright clause of the Constitution.

As Judge Learned Hand noted in 1955:"* * * the performer has a wide choice depending upon his gifts, and this

makes his rendition pro tanto quite as original a composition as an arrange-ment or adaptation of the scare itself (which is copyrightable). Now that it hasbecome possible to capture these contributions of the individual performer upona physical object that can be made to reproduce them, there should be no doubtthat this is within the Copyright Clause of the Constitution. (Capitol Record8,Inc. v. Mercury Record8, Corp. 1955)

Along with the composer, the lyricist, the arranger, the performer isan author. He's an author of that performance. It is unjust, therefore,that the latter i- denied benefits that are enjoyed by the former. Itmakes no sense in art or law to continue this patent discrimination.Similarly, it is unjust that the sound recording is singled out as theonly subject for copyright that is not protected by a performanceright today. This inconsistency in our laws serves only one purpose:To protect the avarice of those who exploit sound recordings by de-nying the authors of the recorded performance just treatment.

The plea of the American performing artist i's a fair one.

On July 8, 1975 the president of CBS complained to the SenateSubconunittee on Antitrust and Monopoly that it was unfair forcable television operators to transmit CBS programing to thoircustomers and not pay CBS. He said-he was concededd" about cable"because it operates outside the copright, structure, profiting fromattractions of free television but not paying for them." Mr. Tayloralso told the Senate committee that 85 percent of what cable tele-vision provides its viewers is what is received at no cost from thebroadcasters, and, because of this, he labele4 CATV "a parasticmedium." He was right. And this committee and the Congress wereright in remedying the situation in 1976.

In a similar manner, the jukebox operators, background musicorganizations, and broadcasters are now selling recorded perform-ances and returning little or nothing to the creators who make it allpossible. One hundred percent of What is pervaded by jukeboxes andbackground music firms and 75 percent of radio's programing iscomprised of recorded performances arranged, produced, perfomined,and paid for by others.

I don't believe that broadcasters are unique here. Others in thehistory of our country and in other societies have ripped out ourtimberland. They've overexploited our farmlands in the search forprofits. Only recently, we've come to realize that this is very wrong,that something must be put back, that forest lands must be replantedand our farmlands cared for in a better way. Well, the same is truewith our human resources. We cannot keep taking and expect to keeptaking from our creative people without returning in some measurethe profits reaped from that taking.

The exploiters of recorded performances, however, claim that theydo offer compensation by way of five air time which supposedlypromotes record sales and the popularity of the individual artist.This self-serving, unsubstantiated claim'ignores the following:

(a) That the goal of the broadcaster is to increase listenershipso that advertising rates and profitability can also be increased. Thegoal is not to promote unknown, untested artists who may or nmynot attract listeners. Stations play the records of artists whose typeof music or individual popularity will assure listeners; hence, it canbe argued that the recorded work of the artist is used to promote thestation rather than vice versa.

(b) Many stations do not announce the artists; so the listener doesnot even know who is providing him with entertainment.

(c) Individual singers or instrumentalists who are hired-to makerecordings on a casual basis but who contribute a great deal to theunique sound or performance that makes one record superior to ormore popular than another are never given publicity on the air. Theyremain, by and large, anonymous to the general public. Some of thesepeople are with us today at this table.

(d) Indeed, providers of background music, the music we hear atthis hotel, in the elevators and in the lobbies, never promote the indi-vidual artist; vet, they exploit their work.

(e) We ignore the thousands of opportunities artists have lostthrough displacement by the sound recording, and this must beweighed against the ephermeral claims of those who are now recording.

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I'd like to digress now with a personal experience. My father wasa recording musician. He was fortunate enough to participate in thefamous NBC Symphony as a violinist. He devoted himself to 12 yearswith NBC to building an orchestra which is probably the worldsleading orchestra, ever, under the directorship of Toscanini. Butthen he was displaced by NBC because NBC didn't need him any-more. They still used his work. He made records for Hugo Winter-halter, for Kostelanitz, Percy Faith, Jackie Gleason. In his lateryears he listened to himself on the radio making money for otherswhile he was unemployed. He had only social security checks whenhe died, but he made millions for others.

His case is a little bit different than the ordinary worker who isdisplaced by technology because other workers weren't asked to con-tribute to their own demise. He was working, as I say, via the record,but he wasn't being paid. It's little wonder that lie didn't and couldnot encourage his children to pursue music as a career.

(f) The problems of overexposure to the individual artist. Testify-ing before this same subcommittee in 1975, the actor and folksinger,Theodore Bikel, pointed out that before the advent of sound record-ings and broadcasting, many performers built their entire careerson the performance of certain plays or musical compositions. "Mil-lions came to their touring performances," lie said. "Today, how-ever, such careers can be telescoped into a single recorded perform-ance mechanically repeated time and time again and broadcast na-tionwide or even -orldwide."

Finally, the broadcasters would have you close your eyes and earsto the future. The advent of inexpensive, easy to operate, qualitytaping equipment undermines whatever little validity there may beto their claim of increasing record sales. The day is rapidly ap-proaching, gentlemen. when it will be possible for individuals to taperecord music and other performances in stereo or monoral broad-casts. When this happens, who will then buy the records and helpcW-mpensate our performers?

This once we plead, let Congress anticipate technology rather thanrespond to it only when it's too late. In our opinion, the argument thatan exploiter of recorded performances also promotes the creator ofthe performance by the simple act of using his or her work is simplisticand irrelevant to the basic philosophy supporting our copyright laws.If it is accepted by this committee ana by the Congress, the same argu-ments can later be used to deny performance royalties to performers.lyricists, and publishers. After all, it can be said that the broadcastof their music also promotes their fame, the sale of sheet music, andthe purchase of their records.

In similar fashion, the cable TV industry argued that by strengthen-ing and improving the broadcaster's over-the-air signals'they providethe TV broadcaster with a larger audience and the justification forcharging advertisers a larger fee. But the broadcasters, a few yearsago, saw no merits to this argument when it was used against theirinterests. In light of this, how can their efforts to make this sameargument against the performance and recording industry be takenseriously?

The performer's plea is for fairness from those who take theirwork and turn it to their own profit, for justice under our laws so

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that they may be treated as others who make a creative contribution tothis society, and, lastly, their plea calls for equity among those whobenefit from their efforts and owe a measure of support.

In a statement delivered to this committee 3 years ago, Mr. AndrewBiemiller, legislative director of the AFI-CIO, pointed out that:"The overwhelming number of performers who make possible therecorded works we enjoy and take for granted almost every day ofour lives are not famous or wealthy. Quite the contrary, they pursueprofessions that are among the lowest paid and highly unemployedin the mntry." His observation has been verified by the recenteconomic study conducted by the Register of Copyrights pursuant toCongress request and is further substantiated by other recent studiesof the performing arts in this comutry that have been conducted. bythe Department of Labor and the National Endowment for the Arts.

You have the Copyight Office's study of the economic condition ofthe performing arts. You don't have to rely on just that study. Wealso have studies by the Department of Labor and the National En-dowment for the Arts all showing that the American performing artistleads a precarious, marginal economic life.

Assuming that our society, like most others in the world today,wishes to encourage these and future talents so that the cultural bene-fits of their work will remain available to future generations, how (toesit correct the situation and insure proper financial incentives for thistalent?

One way, of course, is through government aid. The United Stateshas encouraged this approach indirectly for many years throughtax expenditures that benefit nonprofit cultural institutions employingperforming artists. But this method proved to be insudficient to thetask, and, in more recent years, we have turned to the more directmethod of providing appropriated funds through such agencies as theNational Endowment for the Arts, the National Endowment forthe Humanities, and others. Unless additional funding sources arefound, both of these methods, which reply on government's taxingauthority, will have to be expanded. An additional source, of course,is the beneficiary of the artist's work, and, in most areas, this is stillthe major source. By buying tickets to concerts and plays and purchas-ing records, those who enjoy and benefit from the performers' workdirectly compensate them. But the juke operator, broadcaster, andbackground music firm which also realizes a benefit from the artist'sperformance does not, and this places an inequitable burden on theothers.

Mr. Chairman, you have received a letter from the ConsumerFederation of America, and I would like, with your permission, toread a part of that letter which touches on this matter of the in-equitable burden that the consumer must bear in paying for our talent.

Mr. KATENmFir .R. Please proceed. However, the letter in its en-tirety will be made a part of this record.

Mr. GOLMNER, Thank you, Mr. Chairman. This is a letter signedby Miss Kathleen F. O'Reilly, executive director of the Consumer-Federation of America.

We believe creation of a performance right for recordings will be beneficialto the consumer. At present, the consumer finances the creation and productionof recordings. Commercial users-broadcasters, Jukebox operattors, background

3music services-realize substantial economic benefits from recordings. It is theywho should pay for these benefits through a performance royalty. The presentsituation of imposing that burden on consumers Is unfair and inequitable.

The economic reports prepared for the Copyright Office persuasively demon-strates that commercial users can afford to pay the modest royalties proposed.While the economic gain to singers, musicians, and record companies might notbe great, the adoption of a performance right would be a much-needed step inthe right direction.

At present, almost the entire cost for developing, producing, anddistributing recorded programs, as well as paying the artists, is borneby the millions of individuals who buy records for their personalenjoyment. Relative to the profit they realize on the use of these samerecords, the broadcast industry and other commercial users return verylittle to the. creative sources. The pressures of inflatlon rest whollyon the pocketbook of the individual consumer while those who profit-ably exploit the record enjoy a free ride.

The effect of this inequity among those who bear the costs for main-taining our performing arts is also felt by government at all levels.In a submission to the Register of Copyrights during her study of thisi-sue last year, Mr. Stephen Sell, the chairman of the National As-sembly of State Arts Agencies and director of the Minnesota StateArts Board, noted that, and I quote:

Agencies like mine throughout the country are asked to provide publicly ap-propriated funds to assist artists to carry out their creative work. At least partof the need for this type of assistance is directly a result of the Inability ofartists to support themselves from the marketing of their creative talents * 0 *Performing artists are frequently unable to earn sufficient incomes from theircreative work to avoid calling upon various forms of government financial assist-ance. Commercial entrepreneurs and broadcasters are presently able to use thework of these artists without compensating them for it. While the change in thecurrent system being suggested here may not relieve the government of all itsfinancial responsibilities for performing artists, some Improvement in perform-Ing artists' income potentials would definitely have an Impact. As such, a royaltyfor performers In recordings would definitely serve a public purpose.

AF, I have indicated at the beginning of my statement, our Depart-ment 9nd the AFL-CIO are concerned that with regard to the soundrecording, our nation's copyright laws are flawed to the extent thatthey are overly solicitous of those who use the recorded performances.As new technological developments make it p(G.sible for sound re-cordings to he more easily transmitted and duplicated, the harm in-flictedi upon the creative core because of the parasitic position enjoyedIv those who profit from its efforts will become even more severe.The broadcasters. the jukebox operator, and the back-ground musicsuppliers have helped make it possible for many Americans to hearand enjoy the work of America's performing artists, but, because.ofour laws. they are not required to assume any obligations whateverfor assisting or supporting the creative processes.

But condoning this situation, our laws are out of step with much ofthe world which does recognize the creativity of. the performer andrecord producer and the need tb Provide them. with anpropriate, re-miineration from the uses made of their recordings. I believe the Copy-rie-ht Office studv indicates about 50 countries in the world now rec-ognize a performance right in sound recording. Because we do not, andthis is another aspect of the unfairness of the siturition, our pMrf6im-ers are not receiving any benefits from the play of. these records over-seas; whereas, European and other musicians are.

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, Indeed, in recent years, a growing number of individuals and groupsWithin our own country have seen how wrong the present situation isand have called for a change. In addition to the AFL'-CIO and all ofthe major artists unions, the following are some of the organizations -and agencies that have publicly endorsed the principles of Representa-tive Danielson's proposal: The National Endowment for the Arts;the Democratic party in its platform of 1976; the Republican partyin its platform of 1976; the Consumer Federation of America; theAmerican Council for the Arts; the American Symphony OrchestraLeague; the Committee on Arts and Humanities of the National Com-mission on the Observance of Women's Year; the Muzak Corp. which,incidentally, does not exploit sound recordings because they maketheir own recordings; the Committee on Patents, Trademarks andCopyrights of the Chicago Bar Association; the section on patents,trademark and copyright law of the American Bar Association.

It appears, gentlemen, that the only groups now favoring the statusquo are those who have a direct interest in profiting from it.

Twelve years ago, this committee, through acknowledging the valu-able contribution of performers and record producers and assertingthe-copyrightability of the sound recording, hesitated to recommendrights of p~ihlic performance until the issue had been further clarifiedand a future Congress could give it "full consideration." Since then,this matter his been debated fully before this committee and itscounterpart in the Senate, as well as ini other forums.

The. exhaustive report of the Copyright Office represents a definitiveexposition of the major arguments that have been made over the yearsand the legal, economic, and social questions raised by this issue. TheAFL-CIO believes the Register's conclusions fairly represent theweight of opinion on this matter, and we urge you to-adopt them nowas your own. Thank you very much.

Mr. KAST E N tF MR. Thank you, Mr. Golodner. One of the few para-graphs you (lidn't read from your prepared text related to quotingTheodore Bikel in his testimony before the subcommittee in 1975. Inote that that former witness and friend and well-known actor andfolksinger is here today, and I would like to take note of the fact thatTheodore Bikel is present. I'm very happy to see him again.

Before we proceed to the other two witnesses-and I think we wouldask the other two witnesses to proceed, and then we will open up thequestioning to everybody-I would like to call on mv colleague whoreally should be the host here since the southern Californian on thecommittee contributed so much, really, to the enactment of the copy-right.revision bill and whose proposal it is that we are today con-sidering. Ikd-like to call on our friend, George Danielson.

Mr. IrFSO,. Thank you. Mr. Chairman. I welcome everyone. I'mglad you're here. I know you're not here to hear any words of wisdomthat I may.contribute ;.so this will be one of the shortest speeches onrecord, except I wantto note that until the last witness, I didn't realizethat the performers lived in Appalachia. I don't intend that they shouldlive in Appalachia. but equity and justice, in my opinion, is the basis onwhich relief should be granted if relief is to be granted. I've never be-lieved that people should contribute their property or their servicesto another without fair compensation. It just simply amounts to un-

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just enrichment which is contrary to our theory of law. I thank you andyield back my time.

Mr. KASThNMtEmIR. Thank you, George.Now Mr. Fuentealba. Is that correct, sir?Mr. FUENTrALBA. Excellent. Thank you, Mr. Chairman.Mr. Chairman, members of the subcommittee, my name is Victor W.

Fuentealba. I am the president of the American Federation of Musi-cians which counts 300,000 U.S. citizens among its members. H.R. 6063,which you are considering today, would, as you know, provide somesmall measure of compensation to those artists whose recorded worksare appropriated by broadcasters and others for their profit.

I am joined today, Mr. Chairman, by members of the AmericanFederation of Musicians, musicians who can tell you firsthand of theirown experience in terms of what a performance right can mean to them.These are artists who have invested many years and many thousands ofdollars to develop their talents, but who like-countless others, have hadtheir work exploited without their consent and without compensationto them.

Mr. Chairman, the artists whom I speak for thank you and themembers of the subcommittee for your continued interest in this vitalmatter. It is fitting that these hearings are held in Los Angeles, thehome of Congressman George Danielson, the author of H.R. 6063,whose interest in the welfare of America's performing artists is deeplyappreciated by them, as is your interest, Mr. Chairman, and that ofother members of the subcommitee.

A natural and proper concern of the subcommittee is the correctionof inequities, since our country was founded on the principles of equityover 200 years ago.

While America's performing artists have not waited 200 years for theremedy which H.R. 6063 is designed to provide, we have waited 40years.

It was in 1940, after 3 years of study, that a congressional committeefirst refused to recommend inclusion of a performance right in thecopyright law. The delay at the time was justified on the grounds that"thought had not yet become crystallized on this subject * * * and noway could be founa * * * of reconciling the serious conflicts of interestarising in the field."

James Petrillo became president of our union. He led our union for18 years, during which time Congress not only gave us no relief, butmade matters much worse by enacting the Lea Act, a most deplorablepiece of antilabor legislation. This law, still on the books, makes crimi-nal the use of any economic means-no matter how peaceful and law-ful-to protect or enhance employment opportunities in broadcast-ing. The law, commonly called the anti-Petrillo law, was passed in1946.

In 1961, the then Register of Copyrights, after several interveningyears of further study. informed Congress that "the issues still have notcrystallized" in regard to a performance right. How could recommen-dations be made on issues that had not crystallized ? They couldn't, and,of rours.e, they weren't.

In 1966, Congress did concede that the arguments in favor of a per-formancp right were so overwhelming that there was little direct re-

11

sponse to them, but still it put off consideration of the question until alater Congress because of the concerted opposition of the broadcasters.That was the only reason given for not taking any action.

In 1975, this subcommittee considered a performance right withinthe context of the omnibus revision of the Copyright Act. While defer-ring action on performance rights at that time, the committee, Mr.Chairman, under your leadership, requested the Register of Copy-rights to undertake another study and to report to Congress with apropriate recommendations. -

You now have that most comprehensive study and the recommenda-tions of the Copyright Office. It concludes that establishment of a per-formance right for sound recordings is a mater of simple equity; thatthere are no persuasive arguiments against it; that no legal, constitu-tional, or economic barriers actually exist.

It is now 1978, and I am now before you on behalf of our musicians.Many years have, elapsed, but the issue is the same: How long must webe denied what is rightfully ours? Why, alone, are radio stations andothers who use our music without our consent., exempt from paying forthe product on which they base their business? Where else in our Nationdoes one have to beg to be paid for the use of his work when the peoplewho expropriate that work not only freely admit its value, but becomerich by exploiting it?

And make no mistake, our work is exploited: 75 percent of radiobroadcast time is filled with recorded music; they pay us nothing, theydon't ask our permission, and they charge advertisers up to $150 aminute for local radio commercial time. Yet they pay composers; theypay for other services-for sports, features, news. Then, to add insultto injury, they say, as they have told vQu in the past, that a perform-ance right would make the fat cats richer, but would not help anybodyelse.

That simply isn't true. In 1976, recording companies paid scalewages of $28,177,538 to 25,452 musicians. This means that the averageamount earned by each of those 25.452 musicians was $1,707.08 fromrecording session fees in 1976. These are the people who ask your help.These are the people, as Benny Goodman wrote you when a perform-ance right was last considered, who are "the majority of artists [and]do not make a lot of many."

Not too many years ago, broadcasters hired musicians and singers ona full-time basis. Stations had a staff orchestra and a small staff ofsingers who provided the music that was broadcast. They worked ona great variety of programs ranging from classical to popular. Nowthey are gone, replaced by themselves on phonograph albums and, morerecently, on tape. Their recorded music fills the airwaves, without costto broadcasters, without compensation to them or to their heirs; and,because of its profusion, most of them, or their successors, cannot findjobs after a lifetime of investing as much time and money in theirtraining as does a lawyer or a doctor.

Nor does the problem begin or end with radio. Many more thousandsof musicians and vocalists formerly employed in restaurants, clubs,and other businesses were displaced by sound recordings. Now theirwork is used in its record form to attract customers and help make aprofit for the proprietors, jukebox operators, and background musicconcerns.

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The recording companies cannot offer us relief because their work,too, is being used without payment to them through what is actually aform of legal piracy.

We are not asking for a law that will, in the broadcasters' words."make the fat cats fatter" we are asking for overdue and justified relief.for musicians who, for example, after years of service with the NBCSymphony, sit home with little more than a social security check andlisten to their records on radio while all they get is the commercialmessage, because there is no more NBC Symphony or any other stafforchestra at any radio broadcasting facility.

That is a very bitter thing. It is bad enough to be displaced by tech-nological change, but to be displaced by your own creation is intoler-able.. Be assured, Mr. Chairman, that the hundreds of thousands of artistsfor whom we speak understand and fully appreciate the enormouspolitical pressure that has, over the years, been exerted on the Con-gress by those who want things to continue as they are.

We feel every bit as deeply about this matter as the broadcasters.and we are confident that this committee and the Congress will decidethe issue on its merits. When it does, we also are confident that you willhave earned the gratitude not only of the hundreds of thousands ofmembers for whom we speak, but also of the public who enjoys theartists' work. For, make no mistake about it, adoption of a performance,oyalty would also help the public because it would enable our legiti-mate employers, the recording companies, to defray some of the costsof a high-risk business. Presently, the entire cost of a record is borne-)y the consumer. Commercial users should help share that cost. Theconsumer is becoming tired bf always having to bear the increasingcosts of the arts, while those who exploit the artists' work do not sharethe burden.

We are confident that Congress and this subcommittee will arriveat a fciir determination and that justice will triumph over politicalpressure. Again, thank you, Mr. Chairman, and members of the sub-committee for your dedication and your interest.

Mr. KASTENMETER. Thank you, 'Mr. Fuentealba for your excellentstatement which, in due course, will raise some questions.

Mr. Wolff, we now call on you.Mr. Sanford Wolff. the national executive secretary of the American

Federation of Television and Radio Artists.Mr. WOLPF. Thank you, Mr. Chairman. T would just like to add to

your recogr'tion of the presence of Theodore Bike] here by merelysaying for the panel that Mr. Bikel is the president of one of our fore-most performing unions, Actors Equity. And also with us today is thepresident of the Screen Actors Guild, Miss Kathleen Nolan; and Iwould like her presence tobe noted, please.

Mr. KASTEN,EIER. Thank you, I noted her presence earlier.Mr. DAN EmON. Mr. Chairman, hers was the first presence I noted

this morning.Mr. WOLFF. Gentlemen. I have appeared before this committee back

in 1975, and we've appeared again before a panel in the CopyrightOffice during its hearings in Washington last year. Over the years, itseems that everybody -has appeared before this committee and before

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the Copyright Office. It may well be that everything's been said severaltimes, and the record is pretty complete.

I am accompanied by other artists today as I was in Washington in1975. They are not paraded before you for any purpose other than togive you panel members the opportunity not to become impressed, butat least to become informed about the working life of the backgroundsinger in the United States. Later on, I will take the time to introducethem and tell you something about them and about their work. Youwill recognize their works; you may not recognize any of their fac"sor names.

We do owe and acknowledge special appreciation to CongressmanDanielson for his vision and persistence. It is my firm belief, reaffimedtoday, that the morality of the issue has provided him the strength re-quired to brave formidable pressures mounted by the foes of the legis-lation in several instances.

I would also, as a lawyer, for the record, thank -Miss BarbaraRinaer and Miss Harriet Oler for what must be one .of the most ob-jective, brilliant, and scholarly reports that has ever been handed to acongressional subcommittee. Each time this matter is studied, eachtime this matter is examined on its merits, we find more friends andfewer adversaries. I have, as I have noted, been following this subjectfor many years, both professionally and on behalf of the union that1 represent. Slowly but surely. I've noticed that there isn't anybodyopposed to us that I know about except commercial users of our ;vorks.That opposition seems to become incredibly hysterical, but it's alsovery powerful. They've invoked free enterprise, and they've invokedphony issues of constitutionality and economics. They have, as a mat-ter of fact, even claimed that they really do us, the background singersand instrumental musicians, a favor when they use our product.

They've said that payment of performance royalties would-andI quote Vincent T. Wasilewski, president of the National Associa-tion of Broadcasters-"lead to a reduction in the quality and quantityof radio broadcast service upon which the American public reliesheavily each (lay for news, information, and entertainment." They'vecomplained that the Government has no rizht to require one industryto subsidize another. I'm sure I've heard that argument before. and Iemphatically agree that the recording industry and American per-forming artists ought not to have to subsidize broadcasters and othersh1 having our product pirated and sold by them. I'm quite certaintiet were Vince Wasilewski practicing law today he would be gravelyembarrassed were he forced to make his arguments before a jury ofhis never .

Now that all the facts are in: now that the distinguished .egisterof Copyrights, Miss Barbara Ringer has completed what hais to 6,one of the most exhaustive, painstaking, objective, and carefulIy docre-mented reports I think any of us has ever had the opDortunity of re-viewing, there just are no new arguments to offer. The tired, old'reasonsgiven for denying us what are our rights have been stripped of credi-bilitv and found bereft of truth.

What have we heard so far from people who don't want to pay ourmembers for work they use? The only real argument the broadcastershave made is that they shouldn't pay a royalty because radio sells

386-510-782---2

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records. The truth is that record sales often suffer from overexposureand overplay on the radio. The question is asked, why should one buya record when you can hear it for nothing, and you can be assured, ofhearing it for nothing over and over and over again? It is well toto note now the tremendous advance in the technology of the tape re-corder alone which makes it possible not only for you to hear a recordplayed over a radio station, but to tape it and keep it, and, if you hap-pen to be a pirate, to sell it to others by duplicating and making copies.I don't know quite how to explain it. The fact is that there are moreblank tapes by about 2 to 1 sold on today's m'irket in the UnitedStates than there are tapes recorded with music and singing. Now, Imust admit immediately that a great deal of that, not most of it, buta significant amount of it, is blank tapes sold for industrial purposes.

Another point of interest. I believe, is that all background musicand most broadcast music doesn't promote anybody because seldomis the talent given the credit. The anonymous singers or musiciansworking behind a star are never given credit, and therefore, their ca-reers cannot possibly be said to be enhanced by the playing of thoserecords. The argument almost results in our agreeing that 116x Haleyshould pay the American Broadcasting Company because it popular-ized "Roots." Then you ask yourselves is the network halev's bene-factor or the beneficiary of hiis creative efforts, and the meie askingof the question, I believe, answers it.

In trying to summarize, it seems clear that the radio stations andothers are not making music for the public benefit. They are not play-ing it to sell records for the artists' benefit. Music gets an audience fora station. It takes in money at the jukebox. An audience means a rat-ing. A station with a good rating can charge more, and does chargemore, for its commercials. A philosophical question comes to mind.Does the mortar keep the bricks apart or hold them together? The onlyreason the recorded music is broadcast is to separate the commercialsand get an audience to listen to them, to sell commercial time.

We have no quarrel with that. We believe in it. It's the Americanway: if you have something, you sell it. You make a profit if vou can.But first you really should own what you sell before you sell it anddon't just appropriate it. In harsher words, don't steal.

Broadcasters have, said, in making an argument against the legisla-tion, that. the cost of collecting the royalty may be large and that sin-gers, musicians, and producers, may not get as much money as thebroadcasters would like them to receive. Well, that's a risk we'll haveto take. but I would like to point out that already there are operatingmechanisms in place which would make possible the economical andexpleditious payment to the artist concerned.

Broadcasters have said-perhaps this is meant as their most tellingargument-that radio stations couldn't afford to pay any royalty atall no matter how minor. Survey findings to the contrary, it wouldseem that they would walk a little more gingerly around this allega-tion. And, as a matter of fact, they never have offered any proof to theallegation. I allude to the study conducted for the National Associa-tion of Broadcasters'by the consulting firm of Frazier, Gross & Clayas reported in the May 23, 1977 edition of Television/Radio Agemagazine. The survey projected an 85.9 percent growth in radio sta-

15

tion profits between 1975 and 1985, going from $f.7 billion in 1975 to$3.2 billion in 1985. In December 1977, the Federal CommunicationsCommission reported that 5,638 radio stations and 7 radio net-works reporting to the FCC averaged a 97-percent increase in incomebefore taxes. That increase in income was earned by stations whichfill 75 Percent of their cumulative air time with recorded music forwhich they paid absolutely nothing to those artists who provided theperformances.

I should, at this time, I believe, merely refer you to a short para-graph in the report of the Register of Copyrigh'ts, and I quote:

,Xn independent economic analysis commissioned by the Copyright Office ofpotential financial effects on broadcasters in an effort to provide an objectivebasis for evaluating the arguments-and assertions of both sides of this issue.This study concludes that the payment of royalties is unlikely to causeserious disruption within the broadcasting industry.

I would like to point out to this committee again, just in case it gotlost in the record someplace, that the performing unions in this field-the musicians and the Ainerican Federation of Television and RadioArtists, and the recording companies who hire our members and takethe risks and absorb the ex penses of production, have reached an agree-ment on the division of the modest proceeds from a royalty. As youknow, 50 percent will go to the recording companies as projected. Theother half will be distributed in this way, and I will do it just as sim-ply as I can just to make certain that none misunderstand. Let's take afor instance, a situation in which a leading soloist, a singer such as Mr.Sinatra, Mr. Como, or whomever. In the instance of the productionand preparation of such a recording, let us say that the star or thesoloist has singing behind him 6 singers, and that in the orchestrathere are 15 musicians which would make a total of 22 performingartists. In this instance, whatever the royalty might be, each of those22 persons would realize an equal share of the performer's share of theperformer's royalty.

We're all aware that the fight against this legislation has been giventop priority by the National Association of Broadcasters. We are, youmight say, on their hit list again. It seems axiomatic, forgiving eventhe morality of the issue for a moment, that if any industry is goingto continue to din into the works of others for its'own profit, that atsome point they have to be called to account. Hopefully , you will con-sider this to be the point and recommend that this legislation beadopted.

Those of us who are active on a daily basis in the broadcast fieldare still somewhat puzzled about the pecuiliar double standard adoptedby he broadcasting industry. On the one hand, they argue that theyshould pay the performing artists nothing. On the other hand, as theydid in 1975, the National Association of Broadcasters have said: "It Isunreasonable and unfair to let the cable industry ride on our backs,as it were-to take our product, resell it, and not pay us a dime." That'swhat the man from the National Association of'Broadcasters said.He also said that it offended his sense of the way things ought to workin America. We agree. Thank you. If I've been unclear, if any of ushave been, we're prepared to clarify, and we have some of the laborersin the vineyard in assistance.

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Mr. KASTENME, ER. Thank you, Mr. Wolff.Incidentally, for all witnesses I should perhaps say-perhaps it's

unnecessary to say it, but nonetheless I'll say it for the record-thatquestions asked by those of us here which may seem antagonistic to aposition are not necessarily meant for that purpose, but rather to ex-plore the premises of the witnesses in adversary fashion. So do nottake offense if a question does not reflect, let's say, your own interest.

I particularly appreciated Mr. Wolff's brief explanation of how. ifenXted, the division would take place of the proceeds. Let me compli-ment all three witnesses; you've done an excellent job this morning in -

setting your position. You've indicated support for the Danielson bil.H.R. 6063. The first question is, do you support it in its entirety? Thatis to say, are you familiar with the bill in terms of its-formula and soforth, or is tfiere any section or anything in it which you have a reser-vation about or which you would amend if you had an opportunityMr. Wolff.

Mr. WOLFF. Not only do we support it in its entirety as it's nowwritten, Mr. Danielson s proposed legislation, but I mu-t say that wewould equally support the draft bill as suggested by Miss BarbaraRinger even though there are some differences.

Mr. CoIEN. I was interested in listening to the testimony, Mr.Chairman, because much of the passion was -directed toward jukeboxoperators. For example, in this bill, I notice that they are exempted,and I wonder why.

Mr. Wor'Fr .That is correct. Mr. Cohen.Mr. FtrT,.sNTELA. As fixed in the current law. there would Ib no

Change made there because they would not be exempted from con-tributing to performers' rights.

Mr. KASTE-IMEER. Mr. Wolff, do you say that you approve of II.R.606,3 and/or the draft of Barbara Ringer? Io they differ?

Mr. WOLFF. Well, they do. I've made some notes as to where they dodiffer. I'm afraid 1 didn't commit this to memory, but I can quicklyrun through them. In the first place, in her ininiitable fashion-as vo'ucan tell, I have tremendous respect for Miss Ringer--when she 'im-mediately saw a flaw in the bill, the difference between the rights ofone working for hire, employed for hire, and one who max' be an in-dependent contractor, and she has corrected that flaw. That's justfilling in an oversight, I suppose. and it's not a difference in the bill.But there is a section in which-in the addendum, I believe it wyascalled, addendum to Miss Ringer's report, in which she pointed outsomA of the changes.

Mr. GOLODNER. Mr. Chairman, I think Mr. Wolff is referring to theRegister's report with recommendations on page 27. 1 think you'll findthe comparisons between her recommendations and the Danielson bill.We at the AFL-CIO frankly had not had an opportunity to studyMiss Ringer's recommendations. From what we can gather, they arerefinements which Mr. Wolff has indicated we would be pleased to goalong with in large part. But, in speaking for myself. I would like toreserve, if I may, a comment on exactly where we would draw the line,what we would accept, what we couldn't accept for further submissionto the committee.

Mr. KA aTEN mEJEr. That's anacceptable way of proceeding. I didnot mean to get into technical, legal argument.

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Mr. GOLODNER. They are fairly technical, lfr. Chairman.Mr. KASTENMEIMR. I am interested in how you feel about the general

provision of H.R. 6063 and/or the comments of the Register on H.R.6063. And I would invite further written admissions from you.

Mr. RAILSBACK. Would you yield to me for just a moment?Mr. KA5TEMNMR. Yes.Mr. RAILSBACK. If I read the draft correctly, it would leave the rates

or the royalty payments very, very, I think, identical with the Daniel-son bill. But there are some, I would say, more or less technical, Ithink, improvements. And then there's, I think, maybe a different pro-vision relating to how the royalties would actually be allocated or dis-tributed, and I think, instead of locking in the record companies to anautomatic one-half allocation, the Ringer bill does not do that. If itwould provide, in that respect, a little more flexibility.

Mr. WOLFF. There are some other provisions like criminal liability.Mr. RAILSBACK. She would put this back in?Mr. WOLFF. Right.Mr. KASTENMIER. Mr. Fuentealba, do you have any reservations

about it?Mr. FUENTEALBA. No; I think the bill and the draft are both ac-

ceptable to the American Federation of Mlusicians. There is nothingobjectionable in either bill.

Mr. KASTEN.EIFR. Mr. Wolff, you mentioned the NBC SymphonyOrchestra. I take it that is a sizal~e orchestra. How would each mem-ber be affected if H.R. 6063 were enacted into law?

Mr. WOLFr. Well, unfortunately, you have to have a starting placefor all legislation, and I think the starting place in Mr. Danielson'sbill is 1972. Is that correct for recordings made subsequent to 1972?I believe that's correct. At least there's a starting date, and, un-fortunately, the Toscanini orchestra, and any NBC orchestra as such,has been out of business for a long time.

Mr. KASTENMEIEMR. Let's assume an orchestra that is in business.Mr. WOLFF. But if, let's say, the NBC orchestra-I don't think any

of is have any particular affection for NBC, but we had a great af-fection for that particular orchestra. It was one of the greats, andthas why we've used it for so many times. But in the event theorchestra were to make a recording, when that recording was usedby stations or in a jukebox, which is highly unlikely, I guies. ThereMay be such a classical jukebox on a background music, other thanMuzak which-makes its own music. or has, at least, to this day.

Based upon the rate schedule, you might say both in the draft andin Mr. Danielson's bill, they would make a payment and the--I thinknow I understand the question a little better. You are concerningyourself with one additional record, is that correct, that's put ontothe play lists of the station and how is it going to be divided amongall the people?

Mr. KASTENMINJER. Yes.Mr. WOLFF. OK, I think that we must be quick to confess that

we haven't worked out those details. It didn't seem like a logical thingto do to spend the time and effort and perhaps even dollars with ex-perts in working out the details until we knew we had somethingto work with. But I must say to you that that has already beenworked out in many other areas. For instance, in our pension and

18

-welfare funds, in what we call our supplementary market fumds, intelevision we have worked out manners in which and procedures I)ywhich each person concerned gets his allocated or pro rata share. AndI see no difficulty in doing precisely that. ASCAP has done it. BMIhas done it. Other performance copyright organizations have don(eit. There really doesn't seem to be much of a problem. We just haven'tput our heads to it; so I can't give you a definitive answer.

Mr. KASTENMELER. Well, that is a question, and there was somesuggestion earlier that there had been studies and that the time hascome, and obviously not all things have been worked out.

Mr. FUENTFLBA. We have adequate records of all the personnelwho are employed in the making of the record as far as the AmericanFederation of Musicians is concerned, and we have contacts that arefiled with our regional and national office which have the social se-curity number of every performer on recordings.

Mr. COHEN. The reason I raise the question on pages 6 and 7 ofthe bill is that it points out that where a coin-operated phonographplayer is defined by section 116, and cable system defined by section111, "the comlulsory licensing rates shall be governed exclusivelyby those resp .ctive sections, and not by this susection."

As you turn to those sections, you have a section dealing with the,distribution of royalties. It doesn't talk anything at all about per-formers, but about composers, and that's why I raise the questionabout how the division is going to take place.

Mr. FUENTEALBA.- We had the same question arising after ourdiscussion, and it's answered on page 11 under paragraph G. It says:

The public performance of sound recordings by means of secondary trans-missions and coin-operated phono-record players is governed by sections 111and 116, respectively, and is not by this section, except that there shall bean equal distribution of royalty fees for such public performances betweencopyright owners and performers as provided by subsection (e) (3) (A) of thissection.

Mr. COHEN. So whatever royalty a jukebox owner would pay to thecommission, that has to be divided up equally between the perform-ers and the composers?

Mr. Fu-ENTALBA. Right. But the rate lie pays is already fixed bysections 116 and 111.

Mr. COHEN. What does the composer have to say about that?lMr' KASTENmErER. The author-composer?Mr. COHE.. Yes.Mr. KASTEN.MmEIER. The author-composer is not affected, as I under-

stand, by this bill.Mr. COHEN. He would be affected by this, would he not?Mr. KASTEwNmiEE. No, because-I should let Mr. Danielson re-

spond to that. As a matter of fact, I understand the bill is not opposedby the existing performing right societies because their understand-ing of it is that it is not affected.

The Chair recognizes the gentleman from Illinois.Mr. RAILSBACK. I want to thank all of you for your testimony.

The chairman said earlier that the questions that we ask are notmeant to be hostile, and I'm just afraid mine are going to demon-strate my-I don't want to say ignorance. But, anyway, are therefigures on the average number of working days for a musician right

19now? In other words-I'm just very curious-how steady is em-)loyment for one of your members? Do you have any figures on that?Mr. FUENTWALBA. That's a very difficult question to answer becauseour employment is based on the area. We have, in our federation,approximately 330,000 members in the United States and Canada.Practically all of the television work is done in the Los Angeles area.All of the film work is done in the Los Angeles area. In many areas ofthe country, musicians may work perhaps one night a week or twonights a week, maybe one night a month. There is a great deal of em-ployment in a city like Las Vegas where you have all of your hotelsand lounges that give full-time employment. So it's a very difficultquestion to answer. -

Mr. RAIMBACK. But is it possible for you to develop that kind ofinformation? I'll tell you why. These people, without a doubt, arecreative, and the argument is made that they are paid very good wagesfor the work that they perform. That's my next question. What are thehourly scales for most, ,;ay, for band members or musicians that sup-port., saq, a singer?

Mr. _UENTEALBA. WeIJ, here again, that varies. For example, formaking a recording, the rate for a single session is $121 for a musician.That's the only payment that musician gets as far as recording isconcerned regardless of who uses that, recording and where it's played.A musician-that's working in a nightclub will be paid the scale thatis applicable for that particular area which, again, will vary (depend-ing on the economic situation in that l)articular area. If it's a smallcity, it's very low. If it's large. metropolitan area, it may be higher.Mr. RAlLSBACK. You know, there again, f-would think it would bevery, very helpful for us to have some economic data as to their eco-nomic well-being or their economic Problems.Mr. WoyFF. Mr. Railsback, there s a study that was just made here.A major study was just completed by the I)epartment of Labor whichwas just released about a month ago, and if you want some of thosefigures, I referred to them glancingly. Also, the National Endow-ment for the Arts has figures for the underemployment and poor earn-ings capacity of the performing artists.I have a brief summary here for the record, a )epartment of Laborstudy of the membership of the five major unions here in this areawhich are the bulk of the professional performing artists in this coun-try. You understand that we're talking about performers that may beprimarily employed, say- in the live theater, but they will do record-ings as well as concerts. About two-thirds of the members of Actors'Equity-this is Mr. Bilrel's union-reported some unemployment dur-ing the year 1976. More than half of the AFTRA, AGMA, and SAGmembers, and one-third of the members of the American Federationof Musicians were unemployed in 1976 or had incidences of unem-ployment because they are casually 'employed. But compare this to19 percent of the total labor force had experienced unemployment

in 1976.So, in other words, two-thirds of your actors experienced unem-ployment compared to 19 percent, of the rest of the workers in thiscountry. The duration of unemployment for performing artists islonger than for other groups of workers in the population. For thelabor force as a whole, median duration of unemployment for all

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workers was 16 weeks. That is, half of all the workers had less and halfhad more than 16 weeks of unemployment. In comparison, an aver-age of 69 percent of the performing artists experienced more than 16weeks of unemployment.

As you know, to qualify under CETA, the median earnings of about$7.500 would qualify you for assistance. rhe Labor Department isvery concerned about who is qualifying. Twenty-eight percent of theactors were qualified because they reported household incomes below$7,000, 23 percent of the screen actors, 17 percent of Mr. Wolff's mem-bership, 16 percent of the Guild of Musical Artists, and 15 percentof the musicians. This is total household earnings; so this is not justtheir earnings from their performing. It includes their spouses' earn-ings, for the children's earnings, if they are members of the household.

Here you have people, as the Deoartment of Labor study pointsout, where more than half have a college education, compared to 16 /2percent of the performing artists force. Yet, you have 28 percent totalhousehold earnings under $7,500 in 1976. I would be glad to have thissummary in the record.

Mr. RAILSBACK. Does that study relate to a musician where it's hisprincipal profession ?

Mr. Chairman, could we get that study and make that part of ourrecords? We'd have a better idea as to the economic situation of a lotof musicians. Would that be possible?

How big is the study?Mr. GOLODNER. It is quite voluminous, Mr. Chairman. I think there

is about a 2--page longer summary than this.Mr. RAILSBACK. Perhaps what we could do is make it a part of our

record without having it presented. Could we do that?Mr. KASTENM1EIER. Well, I would invite Mr. Golodner to submit

that for prospective inclusion in the record. We will examine it, andif it's just a 12-page document, it might be suitable for the record.

Mr. GOLODNEnR. This is merely a pamphlet.Mr. ItJENTEALBA. Mr. Chairman, I think it important to bear in

mind it, as not too long ago when there were musicians employedupon mlio stations, and now they're displaced by records.

Mr. RAIL5BACK. I understood that from your testimony. I'm justvery curious. I think a lot of us don't know exactly what their economicsituation is. I had no idea how many of them had to moonlight, howmany of them are unemployed. I-can understand your allegation thatthere has been a serious disruption by reason ofsome of the soundrecordings and so forth.

Mr. WoLFF. In further answer to Congressman Railsback-and Ihope that it needs no saying-in the first place, we can very easily,tlis 'morning, privately or publicly demonstrate to you the life ofthe busiest type of singer doing this kind of work, Very easy. Mon6inipprtantly, I, believe, is I hope that since 1975 we have been able toimpress upon you it's really not important, basically, how much moneythe singer ;is making because you know darn well he's not makingas much as'the broadcast industry, and he's not using their material,they're usin his. The morality of the issue must be the principal mat-ter to be considered here. It just has to be or our whole structure col-lapsesi our whfiole capitalistic structure collapses if one is allowed to

21

steal from the other and get the approbation of the public and theGovernment. This is the important think, sir, and I hope that we havein some way impressed that upon you.

Mr. RAiLSBACK. Yes. That's all I have.Mr. KAWTENmELF. The gentleman from California, Mr.. Danielson.Mr. DANIELSON. Thank you, Mr. Chairman.I'd like to amplify a little bit of what our chairman pointed out

at the beginning. The purpose of this hearing is to obtain and collectinformation for the benefit of the committee so that if and when weget around to marking up a bill, we'll know what changes to make init, what to do with it.

"Mark up" is our shorthand term for "writing the bill." The pres-ent context of H.R. 6063 is sort of a projected plan, a pro forma. Thatdoesn't mean we're oing to wind up that way. In fact, if we do windup that way, it will probably be the first bIll in the history of theUnited States that will-wind up the way it started. Our questions areimportant because we need to have some feedback from those of youwho have expertise in this field so that when we come to marking upthe bill, truly writing the bill, we can make it serve its purpose.

I have a couple of specific questions that I'd like to put to any of you.-We know that with a recording one stellar performance can be usedtime and time and time again. It eliminates the need for the artist orthe artists, plural, to get together and play every afternoon at 2:30.I mean you've got a recording; now you can play'it anytime you wantto. That- has more than one significance. One that bothers me is this:To what extent would the performance royalty do anything towardproviding more jobs, more employment for performers? Any of you,please, field that question for me.

Mr. GOLODNER. I think, Mr. Danielson, it's important. I would liketo reiterate before I begin to answer your question what Mr. Wolff hassaid. This is not a relief bill.

AMr. DAXIELSON. That's my next question, but right now I'd like toknow to what extent will this bill, if it's passed, create more work. morejobs. To what extent will these performers be working more frequentlyand be unemployed less frequently?

Mr. WOLFF. I don't believe it will have that effect at all, Congress-man Danielson.

Mr. DANIELSON. I think that's correct, but I wanted to hear thatfrom one of your gentlemen.

Mr. WOLFF. We have not found any make-work, any encouragementof employment in the bill as such.

Mr. DANImLSON. I don't quarrel with that. That was my under-standing, but I wanted to hear it from the other side of the table. Westill recognize that once a performance is recorded, it then is suscenti-ble to being exploited time and time and time again, and that the effectof having a royalty would be that while the artist does not go to thestudio and play live every day, he will at least get some compensationas a result of 'the occasions on which his work is exploited. In otherwords, his compensation will have some kind of a continuing effectbased upon the use of the recording, but he doesn't go to the studioand play every day.

Mr. FU-FNTEALBA. This would augment the income which is sorelyneeded by all of our members and enable many musicians to continue

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* in the profession which they love, which today they are forced to gointo other jobs and moonlight because they don't have an adequateincome.

Mr. DANIELSON. I understand that. The effect of this bill would bethat a performer who participates would continue to derive a degreeof income from his earlier performance. That's about it, isn't it, ina nutshell?

Mr. FUENTEALBA. Yes.* Mr. DANrr N. Now, one of you gentlemen in response to one ofthe questions said that you had not fully thought out the degree towhich an individual performer would share in the pool.

I believe, sir, that it was you, Mr. Wolff. Would you'expand onthat just a little bit, please I

Mr. WOLFF. There's not much more I can say except that we knowthat there are other procedures and machinery already in place whichhave accomplished the same kind of distribution of pooled funds; sothere are models that we can use.

Mr. DANIELSON. I wish to thank you because your answer is correcthere, but I really am laying the groundwork to making a request.

Mr. WOLFF. Yes, sir.Mr. DANIELSON. One of the facts of life in legislation. be it this bill

or any other bill, is to make it fly. We have to get past this little sub-committee. Then you have to get past a full committee, and then you'vegot to get past the whole Congress. And at every step you have sometremendous thresholds to cross. I am as certain as I am sitting herethat the question will be raised time and time again: Well, won't allthis money simply go to the fat cats-I think one of you gentlemenhave used that term before-how do I know that Tom Jones who playsthe drums or somebody's who's playing the. pian6"or somebody who's a

- little obligato in the background. how do I know he's going to get anymoney out of this? Would you and your best heads please get togetherand work out some kind of a pro forma idea as to how we might be ableto share these things?

This committee will hold hearings again in Washington, if not here,and we're. going to have to be able to answer that question when it's putto us on the floor of the House if we're going to have any possibility ofPassing this bill. So do a little constructive thinking and give us thebenefit of it.. It is not a legislative function to go into that intimatedetail and to put, it into a bill itself.

Mr. KASTrENMEIER. If my colleague will yield on that, I'd like to en-dorse exactly what he has to say. I would like to be able to follow theroyalty dollar from the broadcaster to the pockets of the two witnesseson the end, the singers. I would like to be able to see through whatmechanism it will reach them and at what point in time, how long it is,life plus .50? How would it be monitored? On what sort of shared basiswould this take place? We would have to be able to answer all thosequestions, very franklv, to convince. others that it is a worthy idea.

Mr. WoLFF. Mr. Chairman. we had thought, back in 1975. of pre-paring such a pro forma, as I think you've called it, but we felt that thiswas just oTening up another area in which we could be attacked. You'vegot to understand that if we give you a pro forma, it's going to be, Isuppow., attributed to us as the thing that we insist upon; whervas, I

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would hope it could be presented and received as one of the ways inwhich an equitable distribution could be made. Is that possible? I meancan it be accepted in that way I

Mr. DAxILsoN. That's precisely what my opening comment was. Weare asking questions in order to obtain information which will assistus in marking up the bill. I don't think that we would ever put such a-schedule into a bill. It doesn't belong in law, but the information mightwind up in a committee report which sort of provides the backgroundmusic for the law. And I think it would be very helpfil to us--I knowit would be very helpful to us, and I think it would enhance the chanceof t his'bill passing if it should reach the floor.

Mr. WOFF. We'll do it.Mr.-DA.NELsoN. Fine. We'd welcome it. At least I certainly would.

My last point that I want to make here, you have a statistic that therecording industry paid out some $28 million last year to pay scalewages to some 25,000 performers which would be around $1,100 each.Now, that's an interesting statistic, but to me it's not persuasive of any-thing, and I w ant to tell you why. Within that bracket you have countedevery musician, every performer, who was paid at all. The one whocame 1 day and got 1 day's scale is counted as well as, probably, themost. overemployed performer in the industry, and it just doesn't workout that way: There's little potatoes and big'potatoes. It's not too per-suasive. If you want to give us some kind of a breakdown by bracketthat there were so niany who collected in this bracket and another, thatmight be of some help to us.

Mr. Fur.N.-T.ALBA. We would furnish that information to you.Mr. DANIrjoSN. I think it would be a more valid statistic. I see creep-

ing into the background some of the questions precisely wht Mr. Wolffsaid we're not trying to do here, and I'm glad to hear that. Tis is not asocial reform measure. It's not the function of the Federal Governmentor, in my opinion, any government, to solve all the social ills -ith whichwe're afflicted.

There are some, probably a little more primitive than I, who feel thatthe government's role is to protect. the coastline and coin money. I goa little further, but you're not going to be able, to solve all the ills thatbeset the entertainment industry through this bill or any other bill thatwe could generate. Capitalism,'free enterprise, competition necessarilydictate that some who would like to be, Sinatras or Comos or, heavenforbid, what's that beautiful girl? Olivia Newton-John. They're notgoing to make it.

Mr. KASTENMEIEIR. Congressman Railsback would like to add Linda"Ronstadt,

Mr. DANriEoN. But everybody is not going to make the top dollar.It's tough if somebody who'would love to be a Linda Ronstadt has towind lip as a checker someplace in a food store, but, you know, if youcan't cut it on one level, you're going to have to cut it on another level;otherwise, you're going to have to roost someplace else.

I feel that if a performer has created, by his or her talent or per-formance. something of value that is recorded in some kind of tangibleform so that it can be performed time and time. again, then that personought to get a fair share for his contribution. But I don't feel we haveto guarantee to everyone the optimum livelihood, full employment, andall the other goodies that come down the line.

24

I hope you understand my point of view, and, frankly, I don't thinkyou disagree with me on that.'

Mr. WOLFF. We do have-Mr. DANIELSON. You ought to have fair compensation for what

you've created.Mr. WoLFr. Did I interrupt youIMr. KASTENM EER. No, but we do have a time problem here, and con-

tributions will have to be recognized.Mr. WOLFF. We do have some working singers here who can tell

you what they did, what contribution they have made to the program-ing of the broadcast and the background music and the jukebox in-dustry. We can tell you what their contribution has been, and we cantell you they have received absolutely nothing from those users. I knowyou have a time problem. Could we perhaps just enter into the recordin written form a description of those gentlemen and ladies who arehere today?

Mr. KASTENMEIER. Please. You may certainly do that for the record.Mr. FUENTEALBA. I think, first, Mr. Brown would like to cite an ex-

ample about a recording he had made if we have the time.Mr. BRowN. My name is Ray Brown. I am a member of the musi-

cians union. Some years ago, there was a gentleman who became verypopular via recordings by the name of Jose Feliciano. I'm sure most ofyou must have heard of him at some time. He did a bluesy version ofthe "Star-Spangled Banner" for a baseball game in Detroit whichgot a lot of notoriety. He's a blind man, and we did some recordings.His very first album, he and I and a drummer went into the studio.Now, there's no way for him to read music; so he has to discuss it, andwe just talked about what we were going to do. We discussed thesethings, and some of the ideas were mine and some were his and somewere the drummer's, and we made up these arrangements and recordedthem. Then they brought in an arranger who then took what we haddone and recorded the music for the orchestra which they put overit. One of the tunes we did was "Light my Fire" just to say an in-stance. And this thing was being played all day long on the jukeboxes.on the radio, and I'm back in Detroit where my brother-in-law workSin a factory and my sister-in-law works in a factory. One works atFord; one works at one of the other plants.

They heard this on radio, and they knew I was on the record, youknow, and they said, "Boy. you're going to be rich. We hear that rec-ord all day long." I said, "Listen, I'm not gettine one penny." Theysaid. "You mean you don't get anything?" Well, at that time. scalewas 70-some dollars. I said that's what I got, and that was it. If thatrecord is played in 1990, if it comes back and it's a hit again, I stilldon't. get a penny. -

You know, a guV makes a epr or drives a bus. at least he gets some-thing besides social security. He gets a pension from Ford or from theplInt, you know. but we don't, ,ret not one penny, and this is what

--we're talking about, not how much we make, per se, but musiciansmake what they make at the time, Pnd then, although their stuff isbeinq played. they never get anything else, and when they get old theydon't even get a pension.

Mr. KASTEMitEmR. The Frank Sinatras get so many cents a record,don't, they?

25.

Mr. BRowN. The stars get paid.Mr. GOLODNER. Mr. Chairman, that is not on the use of the record.

They get a royalty on the sale of the record. The consumer, we're keep-ing this whole thing going. But they don't get paid from the use oftheir record. And there comes a time when people will be taping rightoff the air and won't be buying those records, and they're not goingto get any royalties out of the sales. This is what we're concernedabout.

Mr. KASTENMEIER. Thank you, Mir. Brown.I'd like to now yield to the gentleman from Maine and to say

the gentleman from Maine is correct about the provisions of H.R.6063 with reference to the distribution of jukebox royalties. Thiswould be split, presumably, between author-composers and performers.Ahd the presumption, I guess, was that it would be rectified by thecopyright royalty tribunal, this division. But, in any event, he wascorrect in that assumption. I yield to the gentleman from Maine.

Mr. COHEN. Thank you, Mr. Chairman.First, I'd like to say, in rebuttal to what appeared to be an intima-

tion in the presentation by the panel, I'd lik6 to take this opportunityto praise the chairman of this subcommittee. I had the opportunity toserve on this in the past, and he is perhaps one of the most independ-ent and nonpartisan chairmen that I've ever worked with, and I wantto tell you that he does not bend under the weight of pressure, no mat-ter how dense that pressure might be or whatever its intensity, and soihat the fact Mr. Wolff that you might feel that you're on the hit

list of some associations or broadcasters does not mean that either thechairman or the subcommittee or the full committee-shares the samesort of feeling, which is not to say that there are not some seriousquestions to be asked and answered, hopefully, before we ever proceedto the full committee or to the Congress itself. But there are, I think,some legitimate questions which have to be raised notwithstandingyour reluctance, I think, to put forth a proposal which might be sub-ject to attack.

Justice Holmes once said: "The truth of an idea is its ability to getitself accepted in the maii hetplace." And we have to deal in the'market-place of ideas to the extent that those ideas stand the test of criticism,and scrutiny and otherwise so that we have a-better product to go tothe Congress with. Those questions will be raised, and if there arenot satisfactory answers by us. it will be rejected.

Now, I'd also like to say, Mr. Golodner, I was very impressed withthe presentation that you made. I think, however, one thing that youtended to get into which I don't feel was related to this matter wascharacterized as being exploitation. I think you touched upon the ex-ploitation of the land in some sort of analogous situation, and I appre-ciate the intensity with which you are speaking. But it comes to mind,for example, that there is a very controversial measure here in Cali-fornia about the- extension of the protection of the redwood trees. Andthere you saw, I think, that the AFL-CIO did not consider that to bea question of exploitation, that the workers actually had a common-ality of interest with their jobs as far as that was concerned; so. thatwas not necessarily consistent with conservation of the redwoods, butrather, I assume, the AFL-CIO took a different position on that.

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I have a similar situation in Maine right now. For example, we havea proposal for the construction of a dam which would destroy 88,000acres of land, and, of course, the AFL-CIO was in favor of gat con-struction to produce jobs; so it isn't necessarily tied together, the ex-ploitation of land and the exploitation of writers and performers, andthat's something I think we got off on.

Mr. GOLODNFIL I don't think we ignored the human considerationsbecause the resolution of that did provide for those workers that werebeing displaced from the opportunity of making a living. In quite aheavy package, I believe, Congress voted to assist those workers. In the.same way here, we're asking that the workers in the arts field bo some-how compensated for their work. However, I don't think the analogyis quite correct because we are here, and I guess I get in trouble fromspeaking extempormneouslV in reference to-

Mr. CorriN. 1 didn't final it in your prepared speech. Let me ask youthis: How would this benefit the consumer? You made that statement.Mr. Wolff made that statement that such a bill would ultimately bene-fit the consumer. Do you really mean to suggest that prices of recordsare going down as a result of thiis bill?

Mr. GOIJODNER. I don't think they're going to go down. I think it willmoderate pressures for pushing them up. Obviously, when you'rebroadening the base of those who are sharing the costs of the produc-tion of these materials, you are relieving, to that extent, the totalburden which is placed on the pocketbook of the consumer.

Mr. CoimN. I'm not sure I followed that because it seems to me not-withstanding what we do on this committee, the price of records willcontinue to go up like everything else is going up. And I don't see howthis bill will benefit the consumer in the sense that whatever advertis-ing costs'are passed from the broadcasters back to the advertisers willbe passed on once again to the consumer in the form of higher prices;so I didn't follow the logic of that statement.

Mr. GOLODNER. That is theoretical. We don't know how much will bepassed on to the advertiser. The various studies we've seen from theFCC, the Copyright Office, shows that the broadcasters are quitehealthy and probably could absorb some of this additional cost. We'respeculating here, now.

What we do know is the performer can't afford to subsidize thisanymore, and the only place he can go for the money is the recordingcomp9,ny. And the recording companies have to pass that on to the con-sumer, or very frankly, the concern is that they can just as easilyrecord in Ekurope where the musiian there does not have to front loadhis recording session aS much as the American. The American, whenhe goes and makes hisrecording, says, "This is the last chance I'mgoing to get any money out of the recording because I'm not going toget any further payments."

Mr. CohEn. We're pressed for time, and there are a lot of issues I'dlike to discuss. To say that consumers are going to benefit, ultimately.from this particular measure, I don't think that would withstandanalysis.

Mfr' KASENMMFM. I want to thank the gentlemen from Maine andalso for his comments, although I must say the only hit list I knowabout is the top 40 tunes they play today.

N

27SLet me, on'behalf of the committee, say that I appreciate your ap-

pearance here this morning, all the principal witnesses and those ofyou who have accompanied them for their contributions.It is clear that there are other questions we haven't asked. There areareas we haven't explored. We may have to supplement this last hourand a half by other means in the future, but that doesn't diminish thecontribution that you've made this morning. And on behalf of thecommittee, let me say that I appreciate it.

Mr. WOLPF. Thank you, gentlemen.Mr. KASTENmFIER. Now I would like to call, as our next group of

witnesses, the distinguished group of representatives of the NationalAssociation of Broadcasters, and I would like to call on Mr. CarlVenters who is president of the radio station WPTF, Raleigh, N.C.,board member of the National Association of Broadcasters. If he andother broadcasters would come forward, rather than introduce you my-self, I will defer to Mr. Venters and permit him to introduce membersof this panel. -

TESTIMONY OF CARL VENTERS, NATIONAL ASSOCIATION OFBROADCASTERS, ACCOMPANIED BY "BUDDY" DEANS, MAJORSHORT, JOHN DIMLING, WILLIE DAVIS, PETER NEWELL, JOERAYBALL, AND TED ARNOLD

Mr. VF..NTERS. Thank you, Mr. Chairman. As you said, my name isCarl Venters. I'm from Raleigh, NC., president and general managerof Durham Live Broadcasting Service which operates WPTF-AM,WQDR-FM, and WRDU-TV. I also represent the North CarolinaAssociation of Broadcasters.

Before introducing our panel members, I would like to introduceseveral people, several of the broadcasters sitting behind me: WadeHargrove, who is executive director and general counsel of the NorthCarolina Association of Broadcasters; Frank McLauren, who is chair-man of the California Association of Broadcasters from Santa Rosa;Howard Smiley, president of the California Association of Broad-casters; Bob Light, the executive director of the Southern CaliforniaBroadcasters are among the other broadcasters behind us.

Introducing our group here-and several of those will make pre-sentations after I do that-I'd like to first introduce, on my left, Mr."Buddy" Deans, president of the Arkansas Association of Broadcast-ers and also president and general manager of radio station KOTN-AM-FM, Pine Bluffs, Ark.; and, next to me,, Mr. Major Short,president and general manager of the radio station KOBH, HotSprings, S. Dak.; and, immediately to my right, John Dimling, vicepresident, and director of research, National Association of Broad-casters, Washington, D.C.; and, to his right, Willie Davis, presidentof radio station KACE-FM here in Los Angeles; and, next to Willie,Peter Newell, general manager of radio station KPOL-AM-FMhere in Los Angeles; and, also to his right, Mr. Joe Rayball, presidentof the Massachusetts Association of Broadcasters and also of radiostation WARA of Massachusetts and vice-president of WVNA, Salem,Mass. And that, with all those call letters and details, is our panel. Iforgot Ted Arnold down there. Ted Arnold is vice-president and

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general manager of radio station WHBF-AM-FM, Rock Island, Ill.Pardon me. I think that's it.

Mr. KASTENMEIER. Just by happenstance, he comes from Congress-man Railsback's district. Pure coincidence.. Mr. VENTUS. We'd like to begin by asking Peter Newell of KPOL-

AM-FM, Los Angeles, to make a statement. We'll follow thatwith several Other statements and then leave the time open as yousuggest for discussion.

Mr. NwELL. Mr. Chairman, I'm currently chairman of the boardof directors for the Southern California Broadcasters Association.This is a trade organization representing some 125 southern Californiaradio and television stations. A number of our members are presenthere today. and I'd like to recognize them.

' ould the Southern California Broadcasters members please stand.- Mr. KASTEN3MEIER. For the record, I think there are perhaps asmany as, at least, 20 persons so that obviously southern California iswell covered by radio broadcast.

Mr. NEWELL. We are here, Mr. Chairman, to voice a very strongand very sincere opposition to this proposed legislation. We believe itcreates a most unfair and inequitable situation and one that causesus a very grave concern.

A performance right in sound recordings is purely and simply aredistribution of moneys from one segment of the private sector toanother. There will be no benefits to the Nation's economic system fromsuch a transfer of funds and no benefits to the general public.

There will be benefits flowing, however, to record companies and toperformers, but absent economic or public welfare improvements, anydecision to restrict moneys in the private sector must be made on thebasis of fairness and equity.The premise put forward by the supporters of this legislation is thata current ine4uitv exists, that radio stations use recorded performancesin order to attract audiences which they then offer for sale to adver-tisers. Since the producers of the recordings are not paid by the radiostations for the programing material they supply, it is said that radiois exploiting their product. If. in fact, record companies and perform-ers do not receive anything for the use of their product, then they _should be compensated. But let's look at the realities of the two busi-nesses. The record companies and performers derive most of theirincomes from the sale of recordings. By far the most important factorin generatingg record sales is radio airplay. n

Without radio, the record industry would be a small fraction of itspresent size. Fewer performers would be working, and those whoworked would be earning less money. This is a most important point.Radio is responsible for the economic existence of today's recordingmusicians. I ask anyone who's testified here today if their industrywould not wither without radio air play., .

Record companies and performers make no direct payments for thefree exposure of their product on radio. Radio station's, as yet, havenothing to sell but their air time. Advertisers have determined thatthat air time has a tangible value to them. It's a commodity on whicha price has been set; yet, the record companies pay nothing for thatwhich producers of other goods and services pay substantial sums'

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In fact, record companies receive more benefits than paying adve-tisers receive. They get more repeated exposure for their product thancommercial accounts, and they get more valuable exposure. Other ad-vertisers must be content with a mere description of their product. Inthe case of recordings, the product itself is presented for examinationby the potential purchaser.

There can be no question here that record companies and performersreceive something of value from radio stations when they get free airplay. The question is, is that value enough to compensate them forproviding free product for use in stations' programing?

One way to determine the value of free air play is to listen to whatrecord industry executives say about it. Bob Sherwood who's vicepresident of promotion at Columbia Records was quoted recently inBillboard magazine. He said, "If a record doesn't get air play, itdoesn't sell." Last fall, I spoke with John Iloughton, general managerof Licorice Pizza record stores in Los Angeles. He said, "Radio stationair play is the most important factor in the sale of records. The morestations that get on a record, the more it sells, and the higher the playrotation, the more it sells." One record manufacturer's survey of rocksales found that over 80 percent of albums are purchased becausepeople have heard a particular portion, one or two of the songs, overthe radio and like them.

If you want more evidence as to how much importance the record in-dustry attaches to the free use of radio's valuable air time, look atwhat they do, not just at what they say. Record companies give awaytheir product to radio stations free o? charge. They could charge usfor this product, just as they charge the public, but they don't, exceptin the smaller markets.

They give us millions of dollars worth of their product free justto encourage us to play it. They spend millions more in trade paperadvertising trying to get recognition for their new records. They main-tain large staffs of promotion people who are told to get us to add theirnew records to our play lists. In 10-76, the industry employed 185people to do this just in the city of Los Angeles. Fifty-two recordcompanies employed 684 people across the United States tfhat year justto ask radio stations for free air play. They spend additional millionsto buy advertising time on radio stations.

I've heard the testimony this morning about our exploitation, thelegal piracy that we indulge in, the using of their product without con-sent. This is unbelievable. If they could legally do it, the record com-panies would not spend all this money to get us to play their product.If they could legally do it, they would force us to play the product.

So what record companies do as well ,s what they say tells us thatradio air play is the lifeblood of their industry. Our product, ourvaluable air time, given to them in exchange for the use of their prod-uct is what makes the record industry what it is, a $2.7 billion-a-yearbusiness, a bigger industry than radio, their benefactor, by some $700million a year.

What's more, radio's 2 billion annual revenue is divided up amongalmost 7,000 stations. By contrast, most of the $2.7 billion in recordrevenues is shared by fewer than 100 record companies. Radio is anindustry made up mostly of small businesses. The record industry is

86-510---78-----3

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dominated by big business. And here we have their big businesses,made big by our small businesses, saying that they are being treatedunfairly. That is unconscionable.

The record industry will tell you that a very small number of theirrecords gets the kind of air play that produces high volume recordsales. Even assuming this to be true, this group of hit records accountsfor the great percentage of record industry profits and easily coversthe costs of their unsuccessful releases.

If any inequity exists, it is that radio stations are not being ade-quately compensated for all this free advertising. The record indus-try generates $2.7 billion in sales using our product, and we generateonly $2 billion in sales using theirs. Unfortunately, because the FCC.limits the amount of air time we can sell each hour, stations are unableto charge for the records they play. If radio stations are to be chargeda performer's royalty fee, the present balance in the marketplacewould be destroyed. There's simply no rational justification for dis-turbing that balance. We hope the subcommittee will recognize thata performance royalty will create an unfair windfall for record com-panies and performers. We hope you will reject this legislation.

Some potential questions remain to be answered. What about thefact that European nations recognize performers' rights in soundrecording? The answer here is that those nations have broadcast sys-tems which are owned or controlled by the government, and it is thegovernment that pays the performers' fees. This is simply an indirectgovernment subsidy of performers.

Another question: Can radio pass these fees onto the advertisers?The answer is, in most cases, "no." The larger, more profitable stationswould certainly trt to recover these fees through rate increases, butif advertisers rebelled, the station would have to rescind. Most sta-tions cannot raise their rates just because they want to or even be-cause they need to. Rate increases have to be accompanied by increasesin audience size or increased demand for air time. The ]Register ofCopyrights was incorrect in her assumption that we can simply passalong extra costs. But the argument here is not whether stations canafford it, or whether they can pass it along. The question is whetherour industry is going to be mistreated for the benefit of another. Otherswill testify regarding the Register's report, but I can assure you ofanother inaccuracy. It stated that radio station losses reported to theFCC are not real. I can tell you that the figures reported by my sta-tion are real,-and I can never remember from my 19 years in the busi-ness reporting anything other than its actual income and expenses.

Another question: Aren't background sinaers and musicians poorlypaid, and couldn't these fees remedy that situation? I don't have ex-pertise in musicians' compensation. However, it is my understandingthat most musicians are represented by labor unions, and it's their re-sponsibility to.get them fair wages. This is a problem between therecord companies and the labor unions, and the broadcasters shouldnot be brought into it. Moreover, if you assume that these royaltieswill be allocated to musicians based on frequency of record play, themusicians whose records are popular will be 'getting most of themoney. Those who are doing poorly now, because their records aren'tbeing played and aren't being soll, will continue to do poorly. The

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record companies and the star performers are making substantialprofits, and in many cases the income of the star is measured in themillions of dollars. It is these people-the record companies and thehighly paid performers--to whom the musicians should turn for re-lief. Tbe broadcasters, I have already stated, have already paid withtheir valuable air time. They are beneficiaries of our exposure of theirwork.

Another question: Shouldn't classical music and classical musiciansreceive support? I think perhaps so, but not this way. The record in-dustry revenues and profits are growing rapidly without this legis-lation, but the percentage of classical music being recorded is declin-ing. History has not shown that the industry will divert windfallsinto the production of more classical music. Moreover, classicalrecordings represent a minute proportion of records played on theair, and, therefore, the percentage of rights fees they receive will benext to nothing. It will be spread thinly among a great number ofmusicians per each recording as well. Also, classical music radio sta-tions tend to be unprofitable or marginal at best, and they will behurt the most. The public will lose the services of classical musicstations which will either change formats or go out of business. Theloss of even a few classical stations would never compensate for thesmall sums generated for classical performers.

In summation, it might appear on the surface that broadcastersshould pay for the music which is produced at great expense and atgreat risk by the record companies. But going deeper, you can see thatbroadcasters provide the record companies an equally valuable serv-ice and at no charge. The burden of proof that the present system isinequitable lies with the record industry. They haven't supplied thatproof because they cannot. Thank you.

Mr. KASTENMEIER. Thank you, Mr. Venters.Mr. VENTEmS. Our next presentation will be made by Major Short,

resident and general manager of radio station KOBH, Hot Springs,S. Dak.

Mr. KASTENMEIR. Mr. Short.Mr. SiORT. Thank you very much. I don't envy you, you gentlemen

on the committee, considering this kind of legislation when you havenever been in either phase of the recording industry or in broadcast-ing. But for 20 years, starting in 1948, I was a traveling entertainer,musician, and recording artist. For 18 years I was a partner in agroup known as "Someth in' Smith & The Redheads." With this groupI recorded six albums as well as many single releases on the Epic andMGM labels. The recording phase of my career started in 1954 andended around 1960. Since 1968 I've been a broadcaster. I own andmanage radio station KOBH located in Hot Springs, S. Dak. Now,as you can see I've been on both sides of the situation, have had theunique experience of being a performer and a broadcaster, and fromthat experience I make these observations.

When I recorded, I recorded as a union musician in spite of the factthat I was a so-called artist and under contract to the recordingcompany, I still recorded under union contract and, therefore, waspaid union scale for the time I spent in the recording studio. In theevent our record was a commercial success, we'd receive royaltiesfrom the recording company according to contract.

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At recording sessions, all of the sidemen work on union contract andreceive union scale at least. Scale for recording dates is probably thehighest in the business; so recording jobs for performers are regardedas economic plums. I have known musicians who limited the numberof months they would work in recording studios largely because itwould not make economic sense to continue to work into a higher taxbracket. Since the recording musicians are the best in the business,many of them have other regular studio jobs in television and pictures,not to mention live performances if they choose to do so. In all theyears I spent in the recording business, I never saw an underprivilegedstudio musician. As a matter of fact, even as a semisuccessful artist. 1always somewhat envied the economic security of the studio musician.I still do. My conclusion is that there is considerably more greed in-volved in the promotion of this bill than there is genuine need.

My second observation is that the percentage of performers whowould qualify for benefits under the proposed copyright legislationis verv small. Under present conditions, companies can't afford costlyerrors during the recording session; so only the best performers arehired. They represent a very select coterie of musicians and sinwrs.There is talk that the money, collected from the broadcasters wouldgo into a general union pension fund. What logic makes the broad-casters liable for the welfare of the vast majority of performers whonever go near a recording studio? As a member of Musician's UnionLocal 47 in Los Angeles for the past 29 years, I have received unionpublications and have noted the political aspects of the argumentsof union officials. They thirst for a union victory, but that victorywould probably affect no more than a half dozen locals in the country,and that's an estimate.

One of the biggest questions that must be decided is "who is crea-tive?" If it can be decided at all, it requires understanding of whatgoes into a recording session. A session calls upon the talents of pro-ucers, artists, composers, arrangers, conductors, musicians, singers,

engineers, copyists, contractors, editors, not to mention countlessother company employees who make contributions and decisionsprior to the session. From my experience it would be impossible forme to conclude that a musician or singer or any performer, collec-tively or individually, makes any greater contribution or was morecreative than any other member of the production crew. They mustbe competent, or they wouldn't be hired. But they need no greaterdegree of competence than a carpenter or electrician. They are hiredto do a competent job, and they are paid for that job by the companythat hires them. It makes no sense for performers to expect a lifetimeannuity for 3 hours' work in a recording studio.

I would like to call to the committees attention the fact that inalmost every case there are many more performers on a record than -there are composers. The cost of implementing this kind of legisla-tion would, therefore. be significantly higher than the cost for dis-tributing money to the composers. This fact presages higher rateadjustments for a not-too-distant future making the likely economicimpact on broadcasters much greater than-it appears with'this "foot-in-the-door" legislation.

At present., recording companies are solely responsible for every-thing that is recorded. This demands financial responsibility, and

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this consideration automatically requires the companies to search forquality in every phase of record production from the choice of studioto artist to the performers, technicians, et cetera. If the burden offinancial responsibility is lessened, I think you can expect the qualityof product to be affected negatively. There's a considerable amowitof experimentation and indulgence with producers' fantasies now.If the broadcasters start footing the bill, I would expect the empha-sis to switch from quality to quantity, thereby increasing the odds fora "far out" hit for the company. I conclude that the public wouldnot benefit from a glut of recorded garbage.

My final observation is that the recording industry is one of themost successful industries in America. Visit the marinas on the eastor west coast and see the expensive yachts of recording companyexecutives. Visit Nashville, and you can take your choice of minibustours that offer to show you the expensive mansions of performers.The only reason they don't point out the equally impressive mansiorsof the recording company executives is bcaise the public is notaware of who they are. But I've been in them, and I know they'rethere. I don't wisl to deny them their luxuries. I just don't think it'sfair to expect me as a broadcaster to make donations to their welfareanymore than I expect donations to mine. Incidentally, I buy myrecords.

Mr. K ASTENMMER. Thank you, Mr. Short.Mr. VEr TERS. Our next presentation will be made by Willie Davis,

president of radio station KACE-FM here in Los Angeles..Mfr. KASTENMETER. I might say at the outset that Willie Davis is

known to many Americans both to us in Wisconsin as a very specialplace because he was with the Green Bay Packers, and I recountedold times I spent with him when he was player representative forthe Packers. I'm glad to see his success in California.

Mr. DAVIS. Mr. Chairman, I am president of FM radio stationKACE in Inglewood, Calif., a close-in Los Angeles suburb. My sta-tion uses a great deal of music, mostly contemporary soul. My state-ment this morning will be brief and'to the point. 'I oppose-and Iam sure that nearly all owners and operators of black-oriented radiostations oppose-H.R. 6063. I am not a lawyer, and I am not qualifiedto discuss the constitutional issues involved here. I am a business-man in a very tough and competitive fight. I run a small class A FMnation competing against a Los Anveles giant attempting to attract

listeners in large enough numbers to secure advertisers in largeenough numbers to make ends meet.

You realize, I am sure, that there are very few black people in-volved in station ownership. I purchased KACE from a trustee outof bankruptcy. We've had a tough time in getting the station on theair and trying to build a listening audience. I want to tell you onbehalf of e.verv small station operator that one thing we don't needis an additional payment for records that we play. I don't know ifthe artists who perform in the soul music area are creating somethingthat is copyrightable. However. I do know that an extra 1 percentcost of doing business is going to hurt a station like mine. It willaffect the quality and the extent of our public affairs programing.I urge you not to impose performance royalties on the broadcastindustry.

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I understand, gentlemen, that tomorrow your subcommittee isscheduled to take a tour of a recording studio. I would like to respect-fully offer you a tour of KACE. It's located at 1710 East 111th Streetout of the high rent district. I don't think you would find it veryluxurious. While there, you could take a look at my books. I thinyou'd be impressed, for the dollar volume is not there. But I thinkyou would also be impressed with the expense I face. KACE lost aconsiderable amount of money in 1977.

In conclusion, Mr. Chairman, let me quote from the November 24,1977, issue of Jet magazine. Bill Withers, a popular black vocalist,whose hit record "Lean on Me" was one of the Nation's top sellers, afew years back said, "Every dime I've got is from records, and I liveor die by radio..." Thank you.

Mr. RASTENMEIm. Thank you. Mr. Davis. Of course, I suppose if Mr.Bill Withers were here testifying, he would be testifying or the otherside, don't you think?

Mr. VENTER. Our last statement will be made by John Dimling, vicepresident and director of research for the- National Association ofBroadcasters.

Mr. KASTENMEIER. Dr. Dimling.Mr. DTMINO. Thank you, Mr. Chairman. My name is John Dim-

ling. and as Carl says, I'm vice president and director of research ofthe National Association of Broadcasters. I'm also an economist, hav-ing spent most of my academic and professional background doingeconomics, a so today I'd like to talk about the issues in H.R. 6063from the standpoint of an economist.

As you know, the Copyright Office commissioned an economic studyto assist the Register of Copyrights in making here recommendationsto Congress, and she has relied on some of the conclusions of that studyin making those recommendat ions. I'd like, therefore, to review brieflyfor the subcommittee our analysis of the economic issues and to com-ment on how these issues were'dealt with by the Copyright Office andby the economist retained by that office. I wYanted to discuss, namely,the economics, the relationship between the record industry and theradio industry, and I don't think I really needed to say much moreabout that. I should point out that how much more record companyartists derive from the sale of records has been documented in a studyby the later Professor Fredric Stuart of Hofstra University. Thatstudy has been discussed with this subcommittee in previous hearings;so I'll not take the time now to review it unless you'd like me to do so.I would like to emphasize, though, that contrary to what Mr. Golodnersaid earlier, this compensation has been substantiated in that study.

Interestingly, nobody denies that the benefits accruing to performersfrom the free airplay of records are substantial, but the Register ofCopyrights dismisses such benefits because, she says, they are "hit ormiss'-a propitious choice of words. There can be no denying thatsome records "make it big." and others do not, but this is the nature ofthe record business, indeed, of all show business. As long as the suc-cess of records and performers is determined by the marketplace-that is, what the public wants to hear-performing music is likely tobe a business where the rewards are spectacular but unpredictabe.

The second point that I'd like to make has to do with the economics

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of the radio industry. If the cost of operating a radio station are in-creased by the imposition of a performance royalty, many stations willbe forced to cut costs in other areas in ways that will adversely affectthe service they provide the public, and a few stations may even beforced to leave the air, in particular, classical music stations. The radiobusiness is a very competitive business and one in which many stationslose money or operate on very slender profit margins. I'm amused tohear the radio industry characterized as "fat cats" when, according tothe FCC, 35 percent of the stations in the country lost money, and lastyear was a very good year, generally, for the radio industry. In thiseconomic environment, an increase in costs will naturally force a mana-ger to seek ways of reducing other costs; so a performance royaltycould force some stations, for example, to drop a wire service they nowuse for newscasts.

What is the response of the Copyright Office to this concern ? Well,the Office apparently relied on the report of their economic consultantsto deal with this concern; so I'd like to discuss that study now. Thatreport,-which I'll refer to as the Werner report, after the author-makes two points in response to our concern that a performanceroyalty would adversely affect, a station's ability to serve the public.First, the report seems to say-and here I'll have to oversimplify-thateither brodcasters arent' interested in making money or the FCCfinancial data can't be trusted. This conclusion of Werner's is based onthe study's finding that some stations have stayed on the air in spite ofhaving reported to the FCC that they had lost money for 5 straightyears. On the basis of this information, Verner feels that there are"Ihidden profits" in the FCC financial data that broadcasters haven't re-ported to the FCC.

Because there are broadcasters here on this panel, I'll let them tellyou whether or not they report. information to the FCC with profithidden in that data. You've already heard one of them say that that'snot the case. I'll simply point out that as an economist there are manyreasons why a firm might continue to operate over a period of yearseven if it's losing money. Economists and businessmen make a distinc-tion between fixed costs and variable costs. Economic theory tells us thatas long as a finn has prospects for eventually making a profit, it isrational for the finn to continue to operate as long as its revenues are,,reater than its variable costs. Fixed costs like interest payments, de-preciation of property, and so forth, continue whether the stationoelxrates or not; so it makes sense for a station to-continue to operate aslong as it can cover its variable costs.

In practical terms, there are many reasons why a station might re-port losses for several consecutive years and still have hopes of makingmoney. A station may have changed hands, and it may take the newowner several years to turn the station around: some stations may havebemn operations during the period and may still be suffering substan-tial start-tip costs. In some cases, an operator mav decide that he can'tmake a go of it after 3 years, but it may take him 2 years to sell thestation. as a practical matter.

Bv failing to consider these possibilities, the Werner report's con-clusion-that the FCC financial data are, suspect-is nothing more thanconjecture and, we believe, wrong. We appreciate that this subcommit-

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tee will consider the impact of a performance royalty on the radio in-dustry. And we believe that the FCC data are a reliable source of in-formation about the financial performance of the industry.

Now, Werner's second contention is that radio stations can raise theirrates to make up for the cost increase. In economist's terms, Werner be-lieves that the demand for radio advertising time is inelastic. This con-clusion ignores the basic fac, of radio life-that radio must competewith other media for the advertiser's dollar. As any one of the broad-casters in this room will tell you, a radio station competes not only withother radio stations for advertising, but with television., newspapers.magazines, and even media like billboards and direct mail. This, evenif all the radio stations in a given market were to raise their rates, theywould lose business to other media.

In reaching his conclusion that stations could raise their rates with-out reducing their revenues, Werner does several statistical analyses.His analysis, does not, in my judgment, support the conclusions hedraws from it. I can discuss these analyses in as much detail as you like,but for now let me give you an example of what I mean. Wernerexamines changes that have taken place in the rates that radio stationscharge and changes in station revenues over the same period of time.ie finds, for a sample of markets, that between 1971 and 1975 stationrates went up about the same amount as did station revenues, sameproportion, and from this he concludes that the demand for radio ad-vertising is increasing. This conclusion just doesn't follow from thesedata. Both the rate and the revenue increases reflect the effect of infla-tion in that time period, not any increase in the demand for radio ai-vertising in any real terms. They simply reflect the shrinking-value ofthe dollar.

Finally, and perhaps mo3t importantly, the Werner report reallymakes no effort to examine whether a performance royalty would affecthow stations serve the public. The author of the report, in reply to com-ments that we filed with the Copyright Office about his report, said this:

If (the report) does not deal with the question of whether It is fair to broad-casters, nor does it deal with the effect the law would would have on the quality ofpublic service programing. While cutbacks in "community responsive" programingare potential effects on the proposed bill, they are not economic effects.

Now, that may seem astonishing, that a study commissioned toexamine the economic consequences of the proposed payments con-sciously ignored what effect the payments would have on public serviceprograming. But even more astonishing to me is the manner in whichthe Register of Copyrights discusses our concerns about public serviceprograming. They were quoted to you this morniAg by the, earlier panel.In discusing whether performance royalties would cause some stationsto curtail certain kinds of public service programing. shP relies on theVerner report as evidence that performer's royalties would not disrupt

programing, apparently overlooking the facts that, Werner specificallydisclaimed any interest in the issue. He inst didn't look at, that question.

There's a final economic point that I'd like to malke, and that is thatthe financial problems of musicians can't be solved by imosing whatamounts to a tax on broadcasters. Most records are made bv a rela-tively small number of musicians. I'm going to depart from the narn-graph I have there because Mr. Danielson raised a point that I think

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is worth covering right now. Most records are made by a relativelysmall number of musicians. This is Mr. Danielson's small potato-large

-potato problem. In 1976 more than 80 percent of the recording jobswere held by only about 14 percent of the members of the A.F. of L.;that is, a few people do a lot of work. Nearly all the musicians whowork this frequently do very well financially according to a surveythat the A.F. of L. did. According to the Werner report, of musiciansthat had recorded, that had made records, 22 percent of the membersof the A.F. of L. had individual incomes in 1976 of more than $21,000.These are the people that are recording frequently, people that aredoing 80 percent of the recording business; so of the fees that broad-casters would pay under H.R. 6063 for airplay of recorded music,most of the money would go to relatively few musicians, the peoplethat already earned substantial revenues.

Mr. RAILSBACK. May I just ask a question?Did I understand you to say that 22 percent of the people that

perform studio music made $21.000 or more? Is that right?Mr. Dm rNGmro. Yes, Mr. Railsback. According to this report, of

the performing artists, whoever participated in making soundrecordings.

Mr. RAILSBACK. Do you also happen to have the average?Mr. DImLiNe. I do not. I can't calculate the average from this num-

ber. It would be somewhere between $9,000 and $21,000 which doesn'ttell you very much. But my point is that a few people are doing alot of the work, and those people do quite well.

More importantly, there's some doubt about whether I-.R. 6063would actually benefit even the musicians because the costs of admin-istering the system to collect and distribute the royalty paymentscould be so expensive that little money would be left over for themusicians. Again, this is the point that was raised by Mr. Danielson,and I think the subcommittee is to be commended for looking forsome specifics in this area. We do have some information about spe-cifics because the Werner report actually looked at three differentsystems for calculating and distributing the money. Werner's dis-cussion of these three systems leaves some serious questions about thecost or the feasibility of each of these systems. He looks, for instance,at what the music licensing societies now spend in the terms of ad-ministrative costs. BMI spent $5.6 million in 1976. ASCAP spent $8million in 1976 just in administrative costs. And I can be as specificbout some of these other systems as you'd like, but the point is thatWerner recognized that there was a problem here, but he didn't offerevidence that the problem could be solved in a way that would leaveany substantial amount of money for the intended beneficiaries of theproposed royalty payments. Not only does this leave unanswered thequestion of whether the performers'will really benefit from the pro-posed royalties, it also raises some question about the efficiency of theproposal, from the standpoint of an economist, since these so-called"transaction costs," the costs that really aren't contributing anything,appear to be such a large proportion of the total money involved.

Now, there's one solution here. Distribute the money without re-gard to how much the records are actually played on the air or evenwithout regard to whether the recipients played the records. But if

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this approach is taken, it seems to me that this would be dropping anypretense that this legislation is really dealing with any copyright leg-islation. I'm not an expert in copyright or constitutional law. I'vealways understood that the purpose of copyright legislation is to re-ward the performers for their work. It seems to me this makes itclear this is only a tax on broadcasters, not really a protection for thecreators of original material. Thank you, Mr. Chairman.

I have been asked to deliver to you a statement from the NationalBroadcasting Co. in opposition to H.R. 6063, and I'd like simply torequest on behalf of NBC that it be accepted for the record.

Mr. K1ASTENMEIER. Without objection it will be accepted for therecord.

And that, Mr. Venters, concludes your testimony?Mr. VENTERS. Yes, sir. And we're at your pleasure to discuss any

questions that you might have.Mr. KASTENMEiER. Thank you. That was an excellent presentation

by your panel, and I appreciate that it covered a number of issues.The testimony seemed to me to be critical, not only of the bilk butreally of the present system, that is, of the ASCAP, for compensatingthe composers and authors and whether it is a tax on broadcastersand so forth. How do-you respond to that? Are you still sort of re-sisting, let's say, the royalties paid to performing rights societies forauthors and composers? Do you still feel that's unfair, or have youmade your peace with that? to you now see that it's somewhat analo-gous in terms of systems?

Mr. VmT'rErs. I don't know that that was actually raised by any ofthe presentations made here.

Mr. KASTENMEIR. No, it wasn't. That's why I'm asking.Mr. VENTERs. Excuse me.Mr. KASTENMEER. There was reference to how equitable the sys-

tem was and the payout and so forth and so on. These were the samequestions faced by ASCAP and other performing arts societies in thepast. And, in a sense, it, too, could be said that the broadcast indus-try was taxed because they pay royalties to authors and composers.So what I'm saying is many of the same-arguments you made in argu-ments in opposition to this bill are already implicit in the law withrespects to authors and composers. and yet'I take it you've made yourpeace with that particular aspect of the law?

Mr. SHor. May I make a comment about that because that's ab-solutely true. We have made our peace with it. There ih no other wayfor them to be compensated. The recording companies don't pay thecomposers and authors. Composers and authors go around and sub-mit their material to record producers and so forth, and this is justthe way it has evolved. They get all their compensation from copy-right legislation. If this bill were to go through, though, it may be anentirely different means of compensation.

Mr. KASTENMIER. Well, we don't know fully what means of com-pensation would be proposed here. We have an idea in general terms.

Mr. DImLTNG. Could I also make a point from an economic stand-point My reference to the Stuart report-what was done in that studywas to examine the revenues received by various parties involved in theproduction of records. The authors, composers, and publishers actuallygot the money from two sources-from the music licensing fees and

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from the mechanical royalties from the sale of records. The artists ob-viously only get money-and the record companies-from the sale ofrecords. What Professor Stuart found was that, for a sample of rec-ords he looked at, the authors, composers, and publishers were actuallygetting no more, in fact, a little bit less from those two sources thanthe artists were getting from the single source, from the source of rec-ord sales. So that's, I think, an important economic point.There's also, I think, a distincton that ought to be pointed out here.The BMI and ASCAP and SESAC licenses are negotiated each year,and to the extent that negotiations reflect fair market value, I supposeone could argue that those licenses do reflect fair market value. In ef-fect, the legislative rate of payment is what we're talking about here.

Mr. KASTENIMEIR. You are certainly not saying that if this ap-proach were enacted into law that you'dprefer a negotiating positionthan a compulsory license with-the statutory fixed rate, I don't thinkyou want to be open-ended in terms of negotiations, would you.

Mr. DIMrANG. I don't think I would want to speak on behalf of thebroadcasting industry. May I make a comment as an economist,though? I think that what goes on in the radio and record industrysuggest that the payment, if it were negotiated, if there were any pav-ment, would protly go in the other direction. But that's, in'effect,what's being done now because the record companies are deliveringtheir records free of charge to the radio stations. And, in any case. onewould expect that a negotiated rate would probably be less than 1percent.

Mr. KASTF NMETER. Let me ask you this. The panel before us, really,are broadcasters. Is television totally unaffected? We've seen televisionsoul dance programs in the late afternoon. Those involve performingrights, do they not? Or what would be performing rights? Would theybe covered, and many other aspects of television broadcasting? Is thereanybody here able to speak for television?

Mr. OIM)LTNO. They would certainly be covered. I think the concernof broadcasters is focused on radio for several reasons. Television iscertainly interested in this problem.

Mr. RAMSBACK. Mr. Chairman, could I just comment a moment?I think that it is significant that there is a different schedule again

for television compared to radio. I'm not smart enough to know whythe difference in rates, but radio does seem to have what constitutes ahigher percentage rate than television.

Mr. KASTENMEInR. Let me ask you this about coverage; for example,a CBS affiliate radio station doing rebroadcasts of "Mystery Theater."Now, this is not music at all, but if "Mystery Theater" was originallyproduced while such a law were on the books, would the performers,nonmusical though they are, the actors in that radio drama be pro-tected in this bill?

Mr. RAYBALL. It's all-encompassing legislation.Mr. KASTENMEIER. What I'm suggesting is that there's a concentra-

tion on radio and music, but, really, the reach of the proposal goessomewhat beyond that.

Mr. DiMLINo. Yes, that's absolutely correct.Mr. KASTENMETER. One final question of Mr. Dimling since he's

probably the one person who could answer this. You raised serious

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questions about the so-called Werner report. Do you have any reasonto suspect Mr. 'Werner's or his company's neutrality, or do you feel it'sa biased report? Do you have any criticisms of it other than thoseyou've raised in the terms of basic credibility in the report?

Mr. DIMLiNG. Mr. Chairman, we submitted fairly detailed technicalcomments to the Copyright Office, and they haven't been shared withYou. I would love to have an opportunity to send them to you. I don'tthink it would be appropriate for me to try to characterize anybody'smotivations.

Mr. KASTENMEIER. I appreciate that, but, on the other hand, if thisenterprise were engaged to conduct an absolutely, impartial, objective,unbiased report, one on which we can rely in this committee, that'sone thing. But if the credibility or the bias as to that company or as tothe person who prepared the report, well we would naturally want toknow that, too.

Mr. DIMLING. Well, I don't want to suggest that they're biased.They have done some work under subcontract with the AFL-CIO.They are basically labor economists, I gather. But I think there aresome serious technical objections we have, and I don't think their datasupports their conclusions.

Mr. KASTENMEIER. The Chair recognizes the gentleman fromIllinois.

M r. RATLSBAK. Thank you, Mr. Chairman.NBC filed a rebuttal to that particular report, and I notice that in

the NBC rebuttal they specifically said they believed they did not haveenough time. Now, I take it that what you're saying today is that youhave filed perhaps a more detailed rebuttal, and I don't happen to have

-a copy of that. When did you file that?Mr. DIMLINO. The sequence went something like that. Harriet Oler,

from the Copyright Office is in the room. She may have some better in-formation than I have. The report was filed witl the Copyright Officeand released by the Copyright Office on November 7, 1 think. We got acopy of that next week.'The deadline for filing comments was Decem--ber 1. The several broadcast parties filed comments including NBC. Ibelieve ABC filed comments. Those are the comments to which I refer.The copies that you have from NBC were filed with the CopyrightOffice. Since that time we have been able to take a somewhat longerlook at the report. In fact, some of the data that I quoted somewhatearlier on performers' compensations comes from that report.

Mr. RAILSBACK. Now, that's what I want to ask you right now, then.Do you feel that you've had adequate time? Have you been able toput together a more formal rebuttal than you would like our committeeto consider?

Mr. DIV)LT.O. Yes, we have. T'm not sure that it's a more formalrebuttal, to begin with. since you haven't seen the comments that Wefiled with the Copyright Office. I think that that would be a goodbeginning point.

Mr. IRAILSACK. But you've actually added to that, now?Mr. DIMLINO. Yes.Mr. RAILsnACIK. I think we ought to have the benefit of that as well.Mr. DImL.No. Yes, sir.Mr. RAILIAci. Are von familiar that. the definition relating to the

rates is different than the base used for the current royalty payment

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by stations to ASCAP and to BIMI? Do you want to comment aboutthat? In other words, as I understand the bills that we are considering,they would deal with either gross receipts or net receipts, and, then,in determining what constitutes net receipts, they permit you todeduct, I think, advertising charges, but there are some other chargesthat you are not permitted to deduct in arriving at a theoretical item;is that correct?

Mr. VENTERs. After commissions to representatives and agencies,and then the formula begins.

Mr. RAILSBACK. Then let me ask you very generally, and I knowthat Willie Davis addressed himself to this but in looking at the feethat is set forth in the Danielson bill and aiso in what I'll refer to asthe Ringer draft, the rates themselves don't seem to be very high. Butmaybe they're higher than I think. I guess they amount to about1 percent, I think of gross receipts. Is it that rate that bothers you,or is it the principle, or is it both?

Mr. VENTERS. It's the principle, I think, that bothers all of us.Mr. RAILSBACK. Are you afraid it's a foot in the door?Mr. VENTERS. Camel's nose in the tent, or call it what you like.Mr. RArLSBACK. I listened with interest to your experience. It seems

to me that in dealing with this whole question that you have differentpersons that may derive benefits from what we do. Interestingly,you have the record companies, and you've made a persuasive argu-ment that they don't need help by pointing out their revenues and soforth. But then you have your Frank Sinatras and your Olivia New-ton-Johns, and it's true, I ihink, that they may not need help. But thenwe have the little guys. I don't see how you can quarrell with the factthat they may very well be in a very serious economic condition by rea-son of fact that now we have sound recordings that have taken the placeof live musicians. And isn't it true that they're really three differentgroups? You object strongly, to the record companies getting anymore money, and then you point out Frank Sinatra and so forth, butI am not very impressed with your reference to 22 percent of themusicians that make $21,000 or more. I'm kind of curious what theothers make. Did that include their total income or just income fromstudio music?

Mr. DiMLI.NO. That was their total income, as I understand it.Mr. RAILSBACK. And that's not a lot of money any more. That's

their total income?Mr. DI LIO. Yes. A little over half of the families in this country

wish they had incomes of $21,000.Mr. RAILSBACK. All right. But you're talking about people, as

somebody pointed out earlier, that may have taken a lot of time inlearning their particular talent or their art. That particular figurethat you cited kind of bothers me. I'd like to know what the averageincome is, total income of a musician.

Mr. DamLiNo. I'm sure that the A.F. of L. can get that for you. Thepoint I want to make to pick up on our three groups, I was suggestingthat there may be a subgroup, that third group of musicians; namely,the musicians who do a lot of recording work who I think, do quitewell. I think $21,000 is a very respectable amount of money to make incomparison to what other people in the rest of the coimtry make.

Then, the second group of people who either don't participate inrecords--and that's about half of the membership of the A.F. of L.--

42

and those who do participate, but only very infrequently. And thesepeople, if the money that the broadcasters would pay would be dis-tributed in accordance with the records they make and how theserecords are played on the air, these people wouldn't be helped by it.

Mr. RAITABACK. To be honest, after you consider the administra-tive expense in administering any fund, and after dividing up the pieamong everybody. I have to agree with you that its certainly notgoing to be welfare as George pointed ot.. But, on the other hand,I think that an argument can be made that by reason of what hashappened in this new technology and the industry-well, not newtechnology, but without a doubt, there are many talented creativepeople that really may be suffering by reason of, say, sound recordingsand the fact that they are played to the public.

.MIr. NEWELL. Mr. Railsback, I'd like to comment on that. The re-cording industry has been in business since somewhere around theearly 1900's, I believe. I don't believe that there would be very manymusicians today who are working who would have lost their jobsbecause-of the changes in teclmology. I think the musicians who lostjobs because of the emergence of the recording industry are either nolonger living or are out of business. That business has been around along time. The recording business right now is a very rapidly growingand very lucrative business. In the city of Los Angeles in the last 30months, 22 new recording studios have gone into business. We haveapproximately 150 recording studios in this city presently, and theyare working 24 hours a day, recording day and night. The output ofthat,-

Mr. RAILSBACK. Can I just interrupt to say that the charge has beenmade, and it's been repeated by the other side, that this is the fact thatwhere you used to have live musicians.

Mr. RAYBALL. But how can a small or medium market support livemusicians? Small and medium market stations do not depend on na-tional advertising. It's in the local advertising. It's there. It's 90 per-cent of their business. All of these small broadcast stations across thecountry cannot support live musicians.

Mr. RAISBACK. I don't mean to be quarreling.Mr. RAYBALL. But I'd like to go one step further because we've had

one panelist tell you they're already purchasing records. This is themedium and smallmarket station. They are buying their records. Theyare not getting the free services. We have that figure plus BMI,SESAC, and now an additional tax on top of that.

Mr. NEWELL. I think you asked the question of whether it's principleor whether it's the amount of money, and I think it's really both. It'sprinciple in the sense that we believe that we are adequately com-pensating the record companies with free airplay, and they, in turn,can compensate any performers who are undercompensated.

On the other side of the coin, the economic impact, on the small radiostations and the marginal radio stations in the United States is sub-stantial. And that injury could be done to as many as 50 percent of the7,000 radio stations in this country who are either not making moneyor makiffg very small sums of money.

Mr. KASTrEN E[ER. I'd like to now yield to the gentleman from Cali-foinia.

Mr. DANIELSON. I'm going to be extra brief this time. I appreciateyour comments, and I've been following them veryclosely here. I don't

43

want to waste time by being redundant. The thrust of your argumentis that the broadcasting industry can't afford this extra charge. Beyondthat, I can't see any argument that goes to the substance of this theory.Now, under the brackets set up in this bill as drafted, the station withadvertising gross of less than $100,000 would pay $250 in a year. Thatis 1 percent of the first $25,000. It's one-quarter of 1 percent of the$100,000. In the second bracket, $100,000 to $200,000 would be $750, aflat rate which is three-quarters of 1 percent of the first $100,000 andnothing, you might say, on the second $100,000. It's only after you getbeyond $200,000 that you come into the 1 percent bracket.

I'm going to respectfully suggest this. First of all, this formula isnot set in concrete. You have to have, when-you draft a bill, some kindof a pro forma outline to put out for the people to kick around, whichyou're doing, and which I welcome. But at the risk of suggesting thatyou write your own sentence here which is not my point, Imight sug-gest you come up with what you think is a more liveable formula. Youknow, you can't answer these questions by running away from them.If you'd like to suggest a more equitable formula, we'd be willing toconsider it. And, beyond that, I say thank you.

Mr. KASTENMEIER. Well, that's a challenge to you. In conclusion, letme just ask a question. It's a very short question because it is a pointwell made by the 'preceding witnesses that everyone seems to supportthe performing rights royalty excepting the broadcasters and the juke-box operators. Even the consumer interests, the Council for the Arts-they're all, along with the recording industry, the performer, the-AFof L-everybody is aboard. What about that? Is it only broadcastersthat oppose this?

Mr. DAVIS. I would like to respond to that. To the extent that I'vejust, bounced this off of people since I've been involved in testifying,I find it amazing, and I would almost suggest for anyone to do a pub-lic sampling, and do these performing artists come off as underpaidperformers? I happen to have played in the National Football Leaguefor 12 years. I never shared 1 penny of that with television. I heardthem broadcast over to industry. I have an extreme concern. I enteredthis business because I saw it as an orderly market. I'm concerned thatthis kind of thing always creates a certain kind of scramble. And,being a small broadcaster in an area like Los Angeles where I wouldthink not only in Los Angeles but across this country black radiostation owners right now are having a horrible time with monopolyrating service. And I cannot feel for a moment that I could pass onany rate increase when we don't have ratings. And if it's hard to getratings from the ratings service, then you tell me that we don't havea problem as a group of black broadcasters or small broadcasters acrossthe country. And I just feel that any cost is a cost that would have tobe incurred and overcome as an operator, and I seriously questionwhether this business would invite other minorities. And I'm sure anadditional tax would invite me to look elsewhere as a person presentlyin l)usiness.

Mr. KASTENMETER. Thank you, Mr. Davis. But if you can identify anyother interests, why. I'd be happy to know them. But it does seem thatthe broadcasters and perhaps the jukebox industry are alone in theiropposition.

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Mr. NEwELL. Mr. Chairman, I don't believe that any of these otherorganizations have been asked to finance this legislation [Laughter.]

Mr. KASTmENmEIIR. On that, we'll conclude. The subcommittee willconvene at 3 this afternoon.

[Noon recess.]Mr. KASTENMrEE. The committee will come to order. We're resum-

ing our afternoon session, unfortunately, a few minutes late, and Iapologize to the witnesses and to the rest of you, the audience, who arepresent today for being a bit late in resuming the afternoon session.

I'd like to acknowledge the presence of Tom Bolger, an old friendfrom channel 15, Madison, Wis., who happens to be here in Los An-geles. He's monitoring the hearings. I'm pleased to greet as part ofour panel Mr. Ernest Fleishman who is an executive director of theLos Angeles Philharmonic Orchestra. Correct

Mr. FLEISHMAN. Correct.Mr- KAsTFx mEnR. Though not directly associated with Mr. Fleish-

man, ,lso a part of our panel, Mrs. Tichii Wilkerson Miles, publisherof the Hollywood Reporter: and Steve Martindale and Joseph Farrell,president of the National Center for Survey Research connected withthe Council for the Arts.

TESTIMONY OF ERNEST FLEISHMAN, LOS ANGELES PHILHAR-MONIC ORCHESTRA, TICHI WILKERSON MILES, HOLLYWOODREPORTER, STEVE MARTINDALE, JOSEPH FARRELL AND THEO.DORE BIKEL

Mr. FLMSHMAN. I would like to call on you. I recognize the distin-guished conductor of the orchestra, Zubin Mfehta, with Marilyn Homeis not here at this moment, and when they come we will lave themappear as witnesses as well, but, insofar as you are here we wouldhave you speak.

Mr. FLEISHM[AN. Thank you, Mr. Kastenmeier and members of thepanel. Forgive me. please, for not presenting written testimony. Therewas some uncertaintV about the time and so on and so forth of thishearing in our minds, and Mr. Mehta and Miss Home, as a result,have had to offer their apologies. They're busy with a concert thisevening in Santa Barbara, and they were, in fact, recording thismorning, and this is rather appropriate.

In the first place, I think I would like to share with you some in-formation regarding what's happened in places where I have workedbefore. I came to this country some 10 years ago. Until 1959 I livedfor various reasons in South Africa and ran a radio production com-pany which produced programs for commercial radio, produced themand packaged them and recorded them. And many of these involved theuse of phonograph records, and the production companies producingthese programs were in South Africa, for commercial radios were re-quired to. become members or subscribe to IFPI, the InternationalFederation of Phonographic Industries and had t6 pay for everyrecord used in any program, a levy. We had bank returns giving fulldetails of each record used, and at that time the levy was 1 pound,which, unfortunately today isn't very much in the way of dollars. Atthat time it was nearly $5 per record, and, as naturally commercialradio used a great deal'of recordings, there was a lot of noney went to

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this federation which then paid out proportionate shares to the variousrecord companies according to the number of records from each com-pany used, et cetera, et cetera. I do believe in those days those artistswho had the right sort of contracts, infect, did get a share of thosefunds from the IFPI in addition to their royalties on sales.

I then moved to England where, for some 8 years, I was generalmanager of the London Symphony Orchestra and had many dealingswith the BBC. The orchestra performed often for the BBC. Its re-cording tools played bythe BBS, and the rule in England was that-in the first place, the BBC has always been restricted in the numberof recordings it can use. There was an agreement which was negotiatedevery 3 years between the musicians union and the BBC regardingwhat was called "needle time," the number of hours per week thatthe BBC was allowed to use recordings at all so as not to prevent theuse of live music because the BBC employs hundreds of musicians.It runs still five symphony orchestras in LIndon and in the provincesin England. It also employs outside orchestras, independent orchestraslike the London Symphony to do programs. So we have a situationthere where the performers-and I speak from the classical side-de-rive a good deal of revenue from the broadcasting network largelythrough being employed by that network. One might say that theneedle time in a way, or the restrictions on needle time, insured thelive performance of music on radio and was in lieu of a performanceroyalty.

In thiis country, of course, classical musicians derive no income what-soever from the radio stations and very little from television becausethere's some idea prevelant that the general American public is notyet ready for the riches, or whatever, that classical music has to offer.I differ with that, fundamentally, in the tremendous increase in ouraudiences. The Los Angeles Philharmonic alone plays to more than Imillion people every year, and I can't believe that there's a smallerpublic elsewhere in the country for classical music.

But the whole point I'm trying to make is this: That as the electronicmedia in this country have stopped virtually employing classical musi-cians-we're all members of the CBS Symphony, the NBC Symphony;all of these things have been discontinued. Nothing has taken its place.Radio stations are deriving their income from the use of musicians'services in the recording studios. There should be some form of rec-ompense for this. It can be done. It has been done in South Africa. Itwas done in many European countries, in Denmark, for example. Notall companies are signatories to the IFPI agreement, and not all coun-tries employ the use of needle time to insure the employment of musi-cians to provide live music on the electronic media.

There seems, first of all, as I said, a fair case for rewarding the useof musicians' services. There's also a tremendous need, as we all know,for the arts, for music, musicians, symphony orchestras, opera com-panies, et cetera, to find all kinds of sources of funding for them tosurvive at all. Historically, there's always been a tremendous gapbetween the potential income of a major performing arts institutionand its expenses. We are not, as it were, cost productive. We try to beas far as possible, but to put an orchestra on the stage, pay the musi-cians, pay the conductor, pay the soloists, pay the stagehands, pay theushers, pay the publicity, the rent, the electricity, et cetera, unless we

36m-510--78----4

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charge nowadays between $30 and $33 average for a seat, the costscouldn't be covered. I'm talking about a major symphony orchestra.

So we have to look to other sources of funding-corporate, private,foundation sector, and even Government has been extremely helpful,but not enough. And, as costs are going lip, we've got to find these othersources of revenue, and it is obvious that those who are deriving bene-fits, making profits as it were, out of the services of the musiciansshould be required in some form to meet that income gap. Unless weclose that gap, the great performing institutions of this country will,in the next 10 to 15 years, disappear.

Mr. KASTENMEIER. Thank you very much, Mr. Fleishman. I thinkwe will take a question or two for you before proceeding with the bal-aince of the panel because I understand you have to leave.

Mr. FLEISHMAN. I'm sorry about that.Mr. KASTENMEIER. As I understand it, we will not be expecting Mr.

Mehta or Miss Horne, but please convey to them my best wishes, and, ifin any future time, they desire to communicate with us with respect tothis matter, feel free to do so.

Mr. FLEISHMAN. I did inform them of the gist of my remarks that Iintended to make, and they fully concurred with them.

Mr. KASTENMER. I understand. Perhaps you've heard testimony,at least this morning, that even if enacted tis bill would not reallyproduce verymuch in the way of revenues for classical musical artists,relatively speaking. It may be expected that there may be some debateabout it. The most popular form of music would be the chief benefi-ciary, if at all, but that it would be a great disappoinment as far assymphony orchestras and the like in terms of revenue they might ex-pect. Do you concur in that assessment?

Mr. FiEISHMAN. No, not entirely. There is, in the major markets inthis country, still a remarkably large listening public for the classicalmusic stations. I believe there are 17 commercial stations broadcastingexclusively classical music in this country. That was the last count.Most of them are extremely profitable. There's certainly a very profit-able one operating in Los Angeles, and its weekly listenership w~qonly confirmed to me yesterday by a recording company executive. It'sin the region of 2 million.

Mr. KASTENNMIETER. Well, I'm very glad to hear that. I think in Wash-ington, D.C., we have one station exclusively devoted to serious music,WGMS, a great music station which has been constantly on the borderof failing or not making it. Its owners have been at least tempted tochange the format, but the community has prevailed upon them to keepserious music. They're done so even though, apparently, they're notmoney producers. It seems to be our only classical music station inWashington: so I'm not sure that experience is universal.

Let me ask you this: How would you see any royalties collectedunder Mr. Danielson's proposal, or any other, distributed to the musi-cians? Do you see any model for distribution?

'Mr. F.EISnI IAN. Well, the IFPI model, International Federation ofPhonographic Industries' model is one where the producer-in thiscase it would be the radio station-keeps a log and has to pay a levyfor every record used. The collection part of it would obviously besimilar to what happens with ASCAP, BMI, the performing rightssocieties in Europe, and so on and so forth.

47-

The distribution, again, I think we can learn a lot from the com-posers and writers from organizations like ASCAP, how this can bedone. I do believe, also, that the National Endowment for the Artsmight be an adequate administrator for such funds, both for the col-lection and the distribution. I would also point out, as you rightly say,the chief beneficiaries would be the top performers, the popular musicindustry, who probably need it least. There's, again, some precedentin Europe where taxes in certain countries are levied on movie admis-sions, on sports admissions, and used for cultural purposes and, in fact,into the equivalent for what I suppose is the National Endowment forthe Arts, the local ministries for culture and arts councils, and so onand so forth.

So I'm wondering how the recording industry would feel, the popindustry in general. I know there are quite a few artists in the popularfield who have helped the great classical institutions, whether it be theMetropolitan Opera or some of the symphony orchestras or the MusicCenter here. They're interested in working with us where we've alwaystried to find new ways to interest great popular musicians in the clasi-cal medium. We, ourselves, do it with gospel music. We work togetherwith gospel choirs and have produced a new idiom there. In some way,you may say we originated this mania that's now going on for concertswith and music from "Star Wars." But we gladly invite you to Ana-heim Stadium where, I think, the laser and audiovisual spectacular toend all time-[Laughter.1

.Mr. FLEISHiMAN [continuing]. To end all audiovisual spectacularswill take place involving the Los Angeles Philharmonic. It's some-thing we've put together.

But I do feel that the classical sector might benefit from this farmore than it's generally thought if the popular music industry canbe persuaded to, as it were, maybe pay its dues to where it all camefrom.

Mr. KASTENMEER. I understand.At this point I'd like to yield to that great. patron of the arts, the

gentleman from Los Angeles, Mr. Danielson.Mr. DANIELSON. Thank you, Mr. Chaiiman. and thank you, Mr.

Fleishman. I don't think Ihave much of anything to add. I've beenconcerned, as was the chairman, that even if this bill were to becomelaw, would there be a substantial benefit for the performer in classi-eel music. You have given us the opinion that at least in Los Angeleswe have a classical music station which generates enough income sothat there could be a payback.I I want to follow-in the hope that that would be true across theland-I wish to follow up on Mr. Kastenmeier's question of howwould you contemplate that the proceeds should be distributed? Ido not mean through what mechanism. But what persons would re-ceive the benefit from the rovalty?

Mr. FLEISuMAN. I feel very strongly it is not so much the indi-v-idual persons but the institutions, the great performing institutionswho generate much more activity than just providing performances.Xn orchestra like the philharmonic in Los Angeles-and obviously-I'm close to it., and therefore, I can speak with most authority-notonly employs on a 52-week payroll basis 106 outstan(ling professional-msicians, for this it has a support staff of some 26 people. During

48

the summer it employs at the Hollywood Bowl hundreds if not thou-sands of casual workers, not only ushers, ticket takers, -cleaners, etcetera, but in the catering, in the parking, in publicity, the printingthat is generated. The whole benefits to the community that the LosAngeles Philharmonic provides-

Mr. DANIELSON. Sir, let me interrupt because I think we're in anarea that we want to develop, but we may be straying a little. I hadnot thought of this at the time I drafted this bill, but hearing youtalk and following along it occurs to me that the whole context of thisbill was to provide a means through which the individual performers,the musicians, would receive a benefit over the productive lifespan ofthe recording based upon this royalty. Now, the L.A. Philharmonic,as I understand it, employs its musicians on a full-time basis. It'stheir job, their full-time career. They get paid 52 weeks or 12 month.out of the year rather than the individual musician who may be hiredout of the union hall at scale to play 1 day or 2 days in some recordingstudio. Let's see if I can articulate what I have in mind. The pro-vision of the bill calls for a sharing of the royalties between the re-cording company and the performers. When you're treating withsomebody like the Los Angeles Philharmonic, perhaps we shouldhave an adjustment. You're really not talking about the individualperformer. Hes being paid a constant salary, wage, or whatever vonwant to call it. But the L.A. Philharmonic, as such, which may hothe recording artist, if you can think of them collectively, wouldprobably be the organism which equitably should receive the moneyto help defray its costs. This may-not be a valid thought, but it hassome appeal to me.-Will you comment on that a little?

Mr. FLFIsmAN. Yes. This is, in fact, what I've been getting at,that the institutions are in trouble economically, throughout- thecount='y, the great artistic institutions. We all operate at a deficitwhich we try to meet by contributions from foundations, corpora-tions, et cetera. It's, in many cases, not enough. This would help tounderwrite the deficit which would enable us to continue to employthe musicians.

But I would like to say one thing on behalf of the musicians, too.While, yes, our musicians are paid on a 52-week basis all around theyear, their salaries are by no means enormous, particularly, if o1considers that these are the cream of the world's crop of classicalmusicians. There .are, perhaps in the whole world, 15 orchestras ofthe quality of the Los Angeles Philharmonic where each of them hasapproximately 100 musicians. We're dealing with 100 of perhapsthe 1,500 finest orchestral musicians in the world. Their remunerationvery often doesn't come to what the casual musician who would gointo a studio maybe for a day or two can earn in that day or twoas compared with a week's or even a month's work on the part ofa member of the Philharmonic. We'd obviously like to be able to-pay our musicians more, but, in the first place, we are terribly con-cerned that we'll have enough money to meet that weekly payrollon an ongoing basis, and that's what's getting so tough.

The Los Angeles Philharmonic, in the last 9 or 10 years. has maderoughly 70 or 7.5 long-playing records which have been played con-stantlv on radio stations all across the country. With classical records,.their lives, of course, are far longer than those of popular records..

If we had only a small percentage royalty from the performance-of those records on radio stations throughout the country, it wouldhelp-to close that deficit gap.

Mr. DANIELSON. Yes, sir. I'm not arguing with you here. I'm tryingto explore a thought, and I think we're making some progress. Doyou feel that that contribution, that earning from the royalty, should,in that event, then, go to the orchestra for use in meeting its payrollor whatever? Or should it be broken down into tiny little fractionsand distributed among the 110 or 115 members of your orchestra onper capita basis ?

Mr. FLEISHMAN. In actual fact, if it goes to the association, even-tually it is distributed to the musicians. Now, there are some friendsof mine who have testified representing the musicians union, and weare friends. I am not sure in mv own mind whether there shouldn'tbe some provision, probably for a 50-50 division between the indi-vidual musicians and the association.I Mr. DANIELSON. Vell, this is a thought that has not been workedinto our bill, and I don't expect it to be matured here in the 5 minuteswe have available. But I'd like to respectfully make this suggestion:If you ponder this a little bit, and if you come up with some ideaswhich you think might be helpful, pro or con, would you be kindenough to submit them to us because you said there are 15 suchorchestras in the world, apparently?

Mr. FLISHMAN. Of that quality.Mr. DANIELSON. Yes.Mr. FLEIsmirAN. I mean in this country there are some 1,400 sym-

phony orchestras, but there are only 30 so-called major orchestraswhose budgets are in excess of a million and a half a year, and onlyperhaps half a dozen or so of that great stature, of that world stature.

Mr. DANIELSON. But is it the custom in such organizations that themusicians receive a regular, even though small, but a regular paycheck?

Mr. FLEISHMAN. Yes, sir.Mr. DANIELSON. As opposed to the casual musician who hires out

whenever he has an opportunity?Mr. FLEISH.MAN. Yes, sir. They do get a fee for recording, in addi-

tion. In some orchestras, like ours, part of that takes the form of a.guarantee which supplements their weekly paycheck for a certainnumber of recordings each year.Mr. DANIELSON. I thank you and I yield back to the gentleman

from Illinois. -Mr. KASTEwm EIER. The gentleman from Illinois.Mr. RAILSBACK. I really have no questions. Thank you.

-Mr. FLEISHMAN. May I'be excused now ?Mr. KASTEN EI. Of course, Mr. Fleishman, and we thank you

-very much.Mr. FLEISn Ax. Particularly with Mr. Danielson, as we live in the

same city, if we can perhaps carry this conversation a little further,and if I can put some of these thoughts on paper and send them to Mr.Kastenmeier.

Mr. KASTENMrEER. I would be most pleased. I have a couple of otherquestions I will not have you respond to today, but there is a distinc-tion to be made, it seems to me, between classical music and popularmusic. I should think that probably 99 percent of the proceeds de-

50_

rived from this bill for popular music would be returned within thiscountry to American nationals or American organizations. Probablyonly 50 percent of classical artists are American. There's a tremen-dous production of foreign symphonies and foreign nationals in termsof classical artists. They're at least 50 percent of the world's artistsand they're very widely distributed in the United States. It is a dis-tinguishing feature, it seems to me, between the two forms of music.

Mr. FLEISIIMAN. Yes, indeed. But there's a very important pointyou've raised now as far as the recording industry is concerned. Re-cording costs in this country are higher than in Europe. One of thereasons, therefore, why there is such prevalence on the classical re-cording market of European or foreign-made recordings is just thiscost factor. There are other possibilities. If some of the royalty couldbe plowed back, as it were, to encourage more and help underwritemore recording in this country, classical recording in this country,another great service could be done. We're constantly aware of thisand working particularly with musicians union locals here to try toimprove this situation.

Mr. KASTENMIER. I appreciate that fact, Mr. Fleishman. Thank youvery much for your appearance today. One other question I had, andI will not pose it to you for answer now is: The broadcast witnessessuggested that there is a difference, also, between many Europeansystems which the broadcasting system is either state-owned or high-ly state-subsidized, and the relationship between that system and theartist may be somewhat different than our own commercial systemhere in terms of approaching this question. But that is a more generalproposition, and I think it could be responded to by others in letter andother forms as we analyze the competing systems somewhat more fully.Thank you, Mr. Fleishman.

Mr. FLEISHMAN. Thank you.Mr. DANIELSON. Mr. Chairman, may I ask one question here? I'm

terriby sorry.Mr. KASTENMEIER. Of course.Mr. DANIELSON. I want to follow up our dialog. Is there a recognized

organization of classical, serious performers as opposed to popular ?Mr. FLEISHMAN. W611, it is the American Symphony Orchestra

League which is headquartered in Vienna, Va., which is supposed tobe the spokesman for all the American symphony musicians.

Mr. DANIELSON. Thank you. And perhaps we could get in touch withthem. Is it sort of a clearinghouse?

Mr. FLEISIMAN. And the National Organization for SymphonySupport in Washington, D.C.

Mr: KASTENMETER. I will also take note of the fact that we have twoother witnesses who are not at the table, Mr. Johnson and Miss Nolan. _They're invited to come up at this time. Or as soon as the present panelis concluded, they may come up then as they wish, I say to them if theyare in the audience.

At this time I would next like to turn to--now, I don't know, Mrs.Miles, whether you or Mr. Farrell would care to proceed first.

Mr. FARRELL. Well, I'll defer to Mrs. Miles.Mr. KASTEX1EIER. Fine. Then, Mrs. Miles, who is the publisher of

the Hollvwood Reporter, we will be pleased to hear your testimony.Mrs. MitEs. Chairman Kastenmeier, members of the committee, I

am Tichi Wilkerson Miles, and I am the owner and publisher of the

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Hollywood Reporter, and I would like you to meet Steven Martindalewho is our counsel in Washington and Jeffrey Miles who is our counselin Hollywood.

Mr. KASTENM"IEfl. Pleased to have both of you present.Mrs. MILES. Thank you. The Hollywood Reporter is a daily news-

paper which reports on issues affecting the entertainment industry.The Hollywood Reporter has a daily readership of approximately70,000, and among our subscribers are many performing artists, musi-cians, broadcasters, and recording company producers, all of whomwould be affected by the proposed copyright legislation.

My interest in being here derives from the fact that I have observedthe entertainment industry close hand for over 15 years. I have wit-nessed its tremendous economic growth, and I've been fortunateenough to come to know personally many musicians, vocalists, dancers,actors, producers, directors, technicians, composers, authors-peoplewithout whom the industry's enormous economic growth would neverhave been possible. From my vantage point as an observer and com-mentator in the performing arts scene, I have concluded this: Wepossess, in the United States, some of the most creative and talentedperformers and producers in the world.

That is why it is surprising to me that our American performersand producers fail to receive a certain statutory right that 51 na-tions already grant, and that is a performance right in sound record-ings.

Most of our musicians, vocalists, and technicians who contributeso much to the creation of a sound recording need this royalty. What'smore, they deserve it; equity calls for it, and all sound legal argu-ments support it.

I will not endeavor to go beyond my expertise by discussing eco-nomic justifications or legal contentions. It is fairly well known thatone-third of the musicians in the American Federation of Musiciansearn less than $7,000 a year. I believe that point was brought up thismorning. Someone was going to research the amount, and that's whatit happened to turn out to be. More than half of them earned less than$13,000 a year. A recent study has reported that more performers areunemployed, and for longer periods, than other workers. Yet, whilemost performers are economically underprivileged, their sound re-cordings account for 75 percent of all radio programs and $1.9 bil-lion in radio advertising revenue.

What I would like to relate to you today is something more thancold statistics, percentages, or dollars. It is the true story of a musicalperformer, typical of many, who "would have had an easier time ofit," in her words, if performers' royalties had been in existence.

You may or may not know of Beatrice Kay. She has permitted meto report her story in hopes that "recording artists of today will re-ceive compensation in the form of royalties when their recordings areplayed publicly."

Beatrice Kay is a vintage comedienne-singer whose accomplish-ments are many. During the thirties and forties, she made approxi-mately 10 albums, most of which were for Columbia Recordings andRCA Victor. Her most famous hit was "Mention My Name in She-boygan," which sold over 11 million copies. Also, she made famous the

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recording of "I'm Only a Bird in a Gilded Cage." She also appearedin Billy Rose's movie, "Diamond Horseshoe" in 1945.

Today Beatrice Kay Jives on a very small income and social se-curity. A fire a few years ago destroyed all of her possessions. In herview she would have been a wealthy woman had she received royaltieswhen her records were played on the air. In addition to the lack ofcompensation -for air play of her records, she also recalls receivingnothing when a lot of groups used her records and would pantomimeto them across the country. I'm sure you've all seen that. Ive seenthat recently.

I have heard many stories like Beatrice Kay's, economic situationswhich could have been helped by the granting of performers' royalties.We cannot neglect our creative talent any longer. There is no justreason why a sound recording should continue to be the only copy-righted work which can be performed without a performance right.

The fundamental principle in copyright law is that the creator isentitled to compensation for the commercial use of creative product. Itis clear that composers are creators, and it is just that they are being-compensated when their works are played publicly. -However, it isalso clear that vocalists, musicians, and producers are also "creators"in the true sense of the word. Without their talents and interpreta-tions, the sound recording would not exist. It is only just that they,too, be compensated for their efforts when their sound 'recordings areperformed publicly.

I would like to present some general observations on what I be-lieve ought to be done to best protect performers in the proposed legis-lation:

Who should be included as the payors? I believe, first, that all com-mercial users of sound recordings--radio and TV broadcasters, juke-box operators, discotheques, nightclubs, background music operators,and cable TV operators-should be included as payors of the royaltyfees. The Danielson bill is fuzzy on whether it includes jukebox andcable TV operators, and there is- no reason to exempt them. Jukeboxoperators now pay performance royalties to composers, and cable TVpresently pays royalties to broadcasters.

Who should the recipients be, and how should the royalties be di-vided? All supporters of the proposed legislation agree that the rec-ord company, the vocalists, and musicians should share the royalty,and the split has been suggested as 50 percent to copyright owner,the recording company, and 50 percent shared by vocalists and instru-mentalists on a per capita basis. The Copyright Office draft goes alittle further by stating: "In no case shall the disproportionate share.of the performers be less than 50 percent of the amount to be distrib-uted." I support the latter 50 percent minimum for performers. Ibelieve these. individuals should be afforded the ability to bargain fors garenter share of the royalties. Also,. I believe "workers for hire"should be included, as the Copyright Office suggested, as recipients of

-the royalties.What collection mechanism should be used? So many have sug-

gested that the composer-publisher-ASCAP, BMI, SESAC-col-lection system be used, but ASCAP, BMI, and SESAC have not testi-fled as to whether they would, in fact, be willing to take on the addedadministration, collection, and distribution, even though some mutu-

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ally advantageous benefits could result to all concerned. Since the-American Federation of Musicians has raised the possibility of the-records manufacturers' special payments fund as the vehicle for thesetasks, I think this possibility should be explored further.

Who should set the rates ? As to the method of rate setting, I believe-it would be preferable, as RIAA and AFL-CIO have suggested, to,have rates set by negotiations between the parties. And should this.method fail, the Copyright Royalty Tribunal should determine therate. This system has been used successfully by public broadcasters andcomposers under section 118 of the Copyright Act.

A great number of musicians and vocalists were displaced withoutcopyright protection when live radio performances were phasedl out bysound recordings. What is frightening to me is that there is still no.protection for performers as technology continues to advance. Ten, 20,.30 years along the road, we may see still another generation of displacedperformers, and we cannot let that happen.

H.R. 6063, Representative Danielson's bill, will protect our per-formers' rights against ever-advancing technologies. It will raise theincome of individual performers, and it will bring the United States'into accord with prevailing international practice.

I believe. that the time is ripe for performers' royalties. I am glad thatthe subject is being handled by this subcommittee. How much longer are.

-we going to neglect this country's musical talent? How long are we-going to allow the inequities of this situation to continue?

I am sure that when the subcommittee works out a bill on performer'sroyalties, the. rest of Congress will be convinced that the legislation isnecessary, fair, and well justified.

Thank you.Mr. KAsTFNrrER. Thank you very much. Mrs. Miles, for excellent

testimony. I appreciate it. I think we will go on to other witnesses and,then, if you have no objection, questions can be asked of you as youcare to respond to them. We'll now go to Mr. Farrell. and thank youfor waiting. Mr. Joseph Farrell is anpearing on behalf of the Ameri-can Council for the Arts, and we're very privileged to have you with us.

Mr. FRREL, Thank you. Mr. Chairman. and thank you. member. of'the subcommittee. Let me mention a gentleman that you acknowledgedthis morning, Theodore Bikel. Mr. Bike] is vice chairman, currently, ofthe American Council for the Arts. And so, with a certain amount ofadditional humility, let me deliver my remarks to you. Tt may be tbatafter my remarks and the others have' bnn made, Mr. Bikel would liketo answer questions, too, on behalf of the American Council for the-Arts.

Mr. K&STENMETER. Mr. Bikel is here in the audience. I think it wouldbe appropriate to invite him up to join the panel, if he would.

Mr. FARRELL. Let me just, by way of baekwcround. mention that theACA is a nonprofit n,qtional coalition of arts interests. Its membershipis made up of many different kinds of arts organizations and agenciesincluding State and community arts councils and universities, libraries,and other institutions which are involved in the arts. A program of theACA, which we coll the Advocates of the Arts, comprises some 4,000'people who identify themselves as a constituency of citizens who are-concerned alx)ut legislative action for the arts.

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In the 1960's I was chief executive officer of the ACA and in theearly 1970's became an executive with the Harris poll, as most of youknow, and until last year was vice chairman of the executive committeeunder Mr. Harris. Mr. Harris is presently chairman of the AmericanCouncil for the Arts. I am currently president of the National Centerfor Survey Research which is an organization which specializes in re-search for film, television, and media.

What I would like to take just a moment of your time on is what Ithink are two very critical considerations which, in part, have beendiscussed before, but, I don't think have been given quite the perspec-tive that I hope I can give to it for these moments. A number ofauthoritative sources have brought up the reasons why the performers'rights in their recordings are a matter of fairness or correctness or, insome cases, even a matter of the Constitution. I will really pass overthose, although, in my written testimony I mentioned some of those.

The two points I do want to reiterate are: Performers do create aunique experience that goes beyond the composer, and that experienceis deemed after many years of difficult training and sacrifice to reach ah igh level of artistry. It seems to me there's a fairness in compensatingfor this effort. Certainly what I'm concerned about, as you will see, isencouraging more of that effort for great artistry. With the exceptionof a few pop artists-and there were many kinds of artists mentioned afew moments ago that we should be concerned with, in addition, notclassical, but folk, jazz, and many kinds of recording artists--veryfew have high compensation for their work and, in fact, as recentstudies by the Labor Department show, endure substandard pay scalesthrough most of their lives.

The two points I'd ask you to consider with me, then, are really mat-ers of supply and demand of the arts in the United States. And I thinkthe issues are going to become far more acute in the next few yearswhen the equipment is perfected of easily taping off broadcasts of re-corded artists' work. You are being asked, in effect, to update constitu-tional interest to promote the progress of the arts for the welfare of thepeople. Surveys that were done by the Harris firm in the early seventiesand then more recently-the last one last year showed that the Ameri-can public in important, increasing majorities recognizes the importantservice industry that the arts represent. In studies in 1972, for example,a surprising, to us even, 89 percent of Americans felt that the arts wereimportant to the quality of life.

Many other direct, blunt questions done in the Harris name, not inthe name of any arts organizations, were asked of the American public.And, again, very high majorities replied positively about the artsinterest in America. An even greater rise occurs, the acute cut, so tospeak in these kinds of figures when we look at those who ranked in1972. Fifty-seven percent of the American public ranked the arts veryimportant to quality of life, and that went up appreciably more to 69percent in 1976.

The effect of this has been visible in the arts. The attitude has beendemonstrated in a major influx of audiences, visitors to museums. Theniit exhibit in this city is ail astonishing example of that as it has beenin other parts of the country, and I have been part of the studies ofthose, and I can tell you tl ,,'incredible number of people who went tothose shows who, 10 years, ago, had not gone to shows like it.

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There is also the demand on the States and the community govern-ments and the Federal Government for new funding-for these in-creases in public interest as well as more attention given by the busi-ness community in support of the arts.

What I think the committee is asked to decide upon is an appro-priate means of encouraging the arts supply by providing perform-ers with future earnings in their recorded performance. It's appro-priate, not only as compensation for the profits made on their talentby broadcasters, advertisers, and other commercial enter prices, but ascompensation for the past years of persistence and sacrifice to achieveartistry and for the quality of performance which repeatedly enrichesthe public in the recordingbeing broadcast.

This compensation is just plain justice, it seems to me, in gettingback a return on one's own work. It seems, however, to me, and perhapsit is to you, ironic that the Congress of the United States providessubstantial funds to artists and arts institutions who need fundsthrough the National Endowment for the Arts in their authorityto help create and sustain the material conditions facilitating therelease of creative talent and at the same time ignore means of ena-bling artists to earn money through rights in their recordings. Surelythe order of priority should be to provide means for Americans tomake a living wherever possible in order to eliminate the amount ofsupport necessary when they cannot make that living.

The committee is also-and this comes from some of the researchwe've done in recent years-asked to encourage and not discourage thepublic demand for the arts. Better distribution systems of the arts is avery acute consideration today in cultural planning. As we can showby a number of our studies at the Harris firm and the National Re-search Center for the Arts, the quality live performance is frequentlyunavailable to many people in this country. This was understood bySenator Hubert Humphrey who made the point last November that:

People everywhere have seen and felt the impact of the arts now, and they willnot be satisfied with the occasional trip to the East or West Coast metropolis.They want to see outstanding productions and hear great music in their localcommunities.

One distribution solution-of many which are also live types of solu-tions--is the recording where it can bring great value performances tomany people who would not have itbtherwise-frequently available tothem. And we know from research that such opportunities do whet theappetite for the live experience. More and more, the recorded artisticproducts will be a common means of reaching Americans.

At present, the consumer alone bears the total cost of the recordingindustry. Those who profit from it. such as broadcasters. but also juke-box operators and others, give profit, but, they do not give a return inany way to the, performers who provide that profit. Studies haveshown that the broadcasters, as has been noted in testimony over thelast few months, and in turn the advertisers and other commercialusers would be asked to share only a small amount of the burden incarrvin r this cost with the consumer.

Keeping the cost down, it seems to me, even though it will increaseover the years, is an important consideration for the committee, andit seems to me that is tin elerment of what you are considering here.What is really at stake, then, in this rather technical matter of per-

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formers' * rights, is encouraging and sustaining American talent. to,come forward and fulfill the demands put on it by the public for moreartistry in the future. This will continue to increase because, as weknow from our research, and you know by observation, that the in-,crease is not so much due to the efforts of the arts as it is to the moreaffluent and educated American public, generation after generation.But also at stake here is the opportunity to encourage the Americanconsumer to participate to his highest interest levels in enjoyment ofthe artistic product by avoiding undue and unjust costs where that'spossible.

Just a final point. As it has been true in the past about nations-weremember them mostly for their artistry and their cultural achieve-ment-America, it seems to me, will be remembered by the way theartists are being treated today and the type of decisions you're being-asked to make.

Mr. KASTNMmER. Thank you, Mr. Farrell.Mr. Bikel, would you like to add a comment?Mr. BIKEL. If I might, Mr. Chairman. I'm very grateful, and Thou

no stranger to this committee, having testified before and having heardthe extensive testimony of the broadcasters this morning. It seems tome, once again, that we never condoned piracy of any kind. We live ina novel kind of an age; there's a possibility of electronic piracy. Justaq we don't allow people to send their spy equipment into other peo-ple's homes because there's a privacy matter involved, although that'spossible, technically, to do, so it i6 that the product of somebody'slabor may be lifted in an electronic way. We hear all about how sone-body can steal huge sums of money merely because he's learned how tooperate a computer. Very simple: H-types some code words, and all ofa sudden millions have changed hands, and it sometimes takes week.' ormonths before we tumble to that. Now, this is not an obvious kind of'electronic piracy, but it's piracy nonetheless.

We've established, I hope, -that the artist is making a creative con-tribution. not merely an interpretative one. but that the interpretativecontribution is, in itself, a creation because, as Erich Leinsdorf wrote,"If he did not, then why would there be a need of making any more.than one recording?" You could make one definitive recording of agiven composition and say, "that's it: there's no need for any more.'But because there's not just 1, but 2, 3, 10, 50, in the classical field atleast, that implies that the artist, the interpretative artist, is making acreation. If that is so then why is he excluded from the benefits thatare reaped by other creators, namely, the composer and the lyricist?We've already established that they have that. Why not exclude thecomposer and the lyricist on the grounds that their record sales are-being boosted? The same beneficence- that, the broadcasters show to theother performers by boosting their work through public broadcastingis an argument that applies just as well to the composer and the lyricistwho does get a royalty as a matter of course and as a matter of prac-ticality today.

It isn't th Poverty or the helplessness, gentlemen, that we're talkingabout here, althcuigh that has also been misrepresented at this tablethis morning. They tried to make out that recording artists aren't thatpoor. Let us assume that thev had a point there. Maybe they're not all'that poor. I'm not granting the point, but for the purpose of the argu-

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-me , t, let's assume that that's so. If we're talking about the justice oftaking something from somebody without recompense, then it is irrele-vant whether or not these people are poor. Nobody lifts oil from an oilproducer without giving him oil rayalties. We've all established that.Why lift from an artist what he has done without giving him eventhe offer of a split fraction of a penny ? The broadcasters ought to real-ize, in the dauphin's words: "What you get for nothing costs too much."

Mr. KASTrENMEIER. Thank you, Mr. Bikel.Now, I'd like to call on Miss Kathleen Nolan who is a very popular

president of the Screen Actors Guild. I assume popular--elected by*35,000 members of the organization.

Mr. RATLSBACK. Sixty-two percent.Mr. KASTENMEIER. In any event, we're very glad to greet you.

TESTIMONY OF KATHLEEN NOLAN, SCREEN ACTORS GUILD

Mfiss NOLAN. Thank you very much. I, too, have spent the day here:and listened to the testimony of my colleagues this morning. I'm verygrateful to them, and this is an issue that we, of course, join togetheron and have been heavily involved in for many years.

For the record, I am the president of the Screen Actors Guild, andI am speaking on their behalf. We are professional actors that earn

,o1i, livings in motion pictures and television and television commer-cials and all other art forms including the recording field. It is theposition of the Guild, along with the other unions, that this issue ofj)wrformers' rights has been before us for a long time and it's beenha-shed and it's been rehashed and it's been talked about and we havetestified and testified and it's been studied and restudied and the basicfact still remains: It's clear that the United States lags far behind al-most every other civilized country in the world in this regard. I cansay that along with Mr. Bikel we've traveled for many years now toFIA which is the International Federation of Actors along with theInternational Federation of Musicians. And it is a source of embarrass-ment always to us-it is not, Mr. Bikel ?-that every year the issue offhe Rome convention and copyright comes up at this congress, and theyare amazed that this country is still that far behind. It's remarkablethat a nation that is so-steeped in the concept of property rights andrights of the individual can be far behind the rest of the world in thisregard.

As was pointed out this morning, the rest of the world in many wayslooks to the performing arts in this country, at least in our labor nego-tiations, as a model for contracts, and we have given them our expertiseand help over the years. In this one area, certainly, they are looking forsome significant change, and, certainly, we are looking to that fromyou. It seems that the only barrier left in this regard is--I can't evensay the loyal opposition and say it with a straight face. They are prettystubborn, as we heard this morning and have heard over and over andover again, and I thank you for asking the question, Mr. Chairman, ofwho else opposes this legislation. We have not heard much other oppo-sition, as you have heard. We are joined by many interest groups inthis regard. They have, for years, unjustly enriched themselves at theexpense of the recording industry and the artists who perform. Andnow, once again, today they want you to believe that they are entitled

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to permanent benefit peformances by the artist. They, I think, shouldbe rather grateful for the free ride they've had and recognize that itnow has come to an end. Regretably, the drive for profit at anyone'sexpense just seems to be too great a motive for them to overcome, andthe research and the studies clearly establish the feasibility of Con-gressman Danielson's bill, our good friend, and the draft legislationproposed by the Register of Copyrights.

The issue is plain: It's clear whose ox is being gored, and it's timeto put an end to it. It's time to put an end to the continued exploitationof the artists without sharing any of the economic gain. You know,his country is now 200 years old, and it's time that we stopped merelythinking about survival and thinking about the quality of life, and theartist is certainly responsible for that and we strongly urge you tosupport Congressman Danielson and, even more adamantly, theamendment proposed by the Register. Thank you.

Mr. KASTENmE.mm Thank you, Miss Nolan.Finally, to wrap up today's formal testimony, I'd like to call on a

distinguished American and friend who has served as chairman ofthe Federal Maritime Commission, also as a member of the FederalCommunications Commission as he's perhaps even better known, andhe may-who knows ?-have been spared a fate worse than death whenhe failed in an election for the House in the State of Iowa a couple ofyears ago. That remains to be seen. But in any event I'm pleased togreet Mr. Johnson who is chairman of the National Citizens Commu-nications Lobby.

TESTIMONY OF NICHOLAS JOHNSON, NATIONAL CITIZENSCOMMUNICATIONS LOBBY

Mr. JoH NsO. Thank you very much, Mr. Chairman. Yes, those ex--periences have only led to more respect in what it is you're doing outhere today. The National Citizens Communications Lobby seeks torepresent the interests of listeners and viewer. We appreciate this op-portunity to appear before you.

The principal arguments for this legislation seems to be simplejustice and common sense, and certainly the NCCL does favor jus-tice. But it is not really our mission to aid whichever industry em-ployees or small businessess happen to be most depressed by broad-casters this week. For us it's the listeners and viewers who are para-mount; it's their interests that we care about.

Too long has the audience left to closed-door negotiations economicstruggles within the broadcasting industry only to find gratuitous vio-lence and sexploitation forced on TV writers over their protests; thatcable television systems are, for some reason, barred from carryingsignals that any viewer can pick up with a rabbit ears or an antenna orthat favorite programs are canceled because their high ratings includetoo many people over 49. So we finally decided that we have got to getinto some of these seemingly technical issues to see to it that some ofour interests get represented when we sit at home and listen to our pro-grams and watch our television sets.

I would never say that what's good for General Motors is good forAmerica, but the fact is, that mniae often than not, the interests of the

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creative community and the audience coincide. The audience is notserved when big business can treat entertainers like second-class citi-zens, turn its back on widespread unemployment, give us reruns ratherthan original works, simply decree that there will be no more live,drama, engage in rampant profit oriented censorship, or permit a pre-cious cultural heritage to become extinct because "The Gong Show" issomehow more profitable.

We've got to turn to you for help-[Electronic pager or wristwatch alarm from somewhere in the audi-

ence provokes laughter.]Mr. JOHNSON. I appreciate that, providing the soundtrack back

there. I just hope they'lladequately compensated for it.Now, the reason we've got to turn to you and to the rest of Congress

for help is because the FCC has demonstrated a very severe hearingloss. It is, after all, the Government which has created this problemthat you gentlemen have had to come out here and deal with. In mostcivilized countries, as you've heard, the broadcasting establishment isone of the principal sources of support for live music and drama. Theykeep on their payroll numerous writers and producers and actors andmusicians and so forth. It's only because the FCC has no requirementswhatsover for live performances that both worker and audience repre-sentatives have to come before you today in the hopes that you'll helpsolve this problem.

So long as recorded music is going to be used, however, we do sup-port the notion that licensing should be compulsory. Fair compensationis one thing, and we support that, but it also serves the interests oflisteners and viewers to prohibit the withholding of potential programmaterial in efforts to exact the highest dollar.

Broadcasters are complaining about the 1 percent fee. Thre issomething very heartrending about a man who argues that to take only99 percent of the profit of another man's labor is not enough, that hemust have the 100 percent. We need scarcely concern ourselves withability to pay such amounts by an industry which can average nearly100 percent per year return on depreciated capital and whose net as aproportion of gross is roughly four times that of the oil industry in oneof that industry's greediest eras.

On the other hand, we recognize that there are exceptions. The pub-lic interest is also served by keeping the very smallest stations onthe air, and we certainly support the exemptions for them that havebeen created in this bill before you.

Finally, we note with amusement, in looking at the text of the bill,that there is a way out of this legislation for the broadcasters, a gapingloophole which we laso support. Under the bill's definition of com-mercial time, a broadcaster may avoid the payment of royalty if hewill offer the public 141/2 minutes or more of programing uninter-rupted by commercials. That is an option as delightful to contemplateas it is unlikely ever to be heard.

Mr. KASTENMER Thank you, Mr. Johnson. I must say I didn'trecall that commercial time option existed in the bill.

Mr. JoHNsoN I may, in the speed of reading this legislation, pre-paring a statement, and getting it copied this afternoon, not haveproperly interpreted that, I should note with all candor. But there isa definition of commercial time which exempts from commercial time

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anything over 141/2 minutes, whatever the consequences of that mayprove tp be.

Mr. KAs5 ENINMER. Yes, that's very interesting. We should, I think,explore that further. We may again have problems with our sistersubcommittee in the Commerce Committee which will want to haveequal time with respect to reviewing anything that affects the broad-casters and television. But this is a very interesting option. May I askthe panel-Mr. Martindale, Mrs. Miles? If any of you also care tocomment, you may, in addition to Mrs. Miles. Mr. Farrell, Mr. Bikel,and Miss Nolan. You all support, in general principle, the Danielsonbill as may be modified-you may or may not have access to materialrelating to it-as modified by the Regisier of Copyrights' suggestedmodifications. You're aware of them? Is that more or less correct?

Miss Norsw. It is, as far as we are concerned, yes.Mr. KASTENMEMR. One other thing, tomorrow we'll have represent-

atives of the recording indusry with us. An apparent variant of the50-percent payment to the recording industries-and perhaps forsome of us it may go back to a conceptual notion when we're talkingabout creative contributions to artists and performer-whether, infact, we're talking about the same degree, we're talking about techni-cians? And if so, what technicians? And are we talking about therecording industry as such ?-And to the same extent that we're talkingabout performers ? If we can quantify, or if we can discriminate amongor between these parties.

Mr. Johnson, let, me ask you, do you feel the recording companiesshould be in for 50 percent of the .100 percent? Should it go to theperforming rights?

Mr. JoHNsoN. Well, I must say it concerns me. I mean I have lessconcern about the economic welfare of the recording companies-which, from all evidence, appear to be doing rather well-than I dofor the performers themselves which is our principal concern. How-ever, whatever the outcome of my congressional race, I can developenough political savvy to know that one has to give a little in order toget a little, and I presume that was how we came up with this marvel-ous 50-50 share. Also, the opportunity is left open for the performersto bargain with the recording companies for something in exce& of.50 percent. At least. I would share with Mrs. Miles the notion that50 percent should be minimum, and above that they could bargainfor more.

Mr. KASTENMRER. My recollection was, as far as the recording com-panies, in 1965 the first prototypes or variations of this did not includethe recording companies; it 'included the performers only. and therecording companies resisted as, indeed, the broadcasters do today,this particular formulation. And somehow, in later variations after1965, the recording companies participate for a proportion as to per-formers and, indeed, as to authors and composers presently.

At the risk of being facetious, if we were to split this'three ways,have the Government pay for it all and give the broadcasters onethird as well, there might be no opposition whatsoever. [Laughter.]

Any comment?Mr. BKm.,. Broadcasters get 100 percent anyway. They would re-

sist such a partnership. It seems to me that if the principle of that

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participation is not going to win, they're going to talk the formulato death, of collection and distribution. And Tsuggest that enoughformulas have been put forward that are workable and equitable, bothby way of the way Mr. Fleishman detailed it as handled interna-tionally by the IFPI which distributes both to phonograph companiesor record companies and to artists, or by way of our own model alongwhich composers and lyricists act, and that is the ASCAP, BMIformula of collecting in bulk and distributing according to theirown internal formula to the artists according to their time and otherconsiderations.

Mr. RAILSBACS. Mr. Chairman, on that point, may I just kind offortify what the chairman said about a concern that is really heldby many of us? That is, whatever we may do we are going to have tosell to a lot of members that are going to be lobbied, assuming that we

-decide to report out a bill. I know what happened. I mean I think Ihave an understanding like Nicholas Johnson suggested, and I'm verymuch aware that sometimes we have a need to compromise. But itjust seems to me, politically, that it's going to be very difficult forus to say look at these recording companies who need this 50 percentof whatever the royalty may be. I have a very high regard for therecording industry and Stan Grotikov, and I see my friend Jim outthere, anU I'm happy to say this publicly in front of them: I have reallya lot of trouble justifying paying 50 percent of a performer's royalty torecording companies. I want to ask you this same question. I certainlyagree with your constructive comment that would alter the Danielsonbill, but I think we're going to have to do some thinking about this.Frankly, it may be easy for you to negotiate, but I think there's goingto be a lot of concern about that kind efa division.

Mrs. Miles, did you want to respond?Mrs. MILES. If that 50 percent that goes to the recording companies

is, according to the Register's proposal, negotiable, and you can negoti-ate upward from there, then I suppose the mechanism would be that thecreative individuals who comprise the team that makes the sound re-cording could then negotiate for their own additional share of therecord company's 50 percent. This would be, in effect, negotiating forpart of the producer's share. It could be left up to each individual.

Mr. KC&STENMEIER. Now, I'd like to yield to the gentleman from-California.

Mr. DANIELSOX. Just following up where we were. I think wealready have under our present copyright laws the facility for a starto negotiate a royalty at or before the time that the recording is madeto share with the recording company.

Mrs. Miles, I think with Miss Kay, whom you mentioned, andwho I'm sorry is not in the best of all possible 'worlds, that's toughbecause she's earned it. But even she, if we had been operating 30years ago as we operate today, could have negotiated a special rovaltyfor herself as does Mr. Sinatra, Mr. Como, and other names that havebeen mentioned here today--and I'm not opposing that; I'm for it.But what I'm concerned about is this very same point which wasjust mentioned here, and we raised it this morning. I would like tohave you people who are interested in the performance to send ussome letters or outlines telling us how you feel the distribution of theproceeds should be spread out.

8 6-510-7-'8 5 0

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I see Miss Nolan is waving her hand over there, and maybe she'sseeking to respond to that Would you, please?

Miss NrLAN. Yes, I would like to. I think this question of theshare that the recording industry would, under the present formula,receive-I think it's the same, or there can be an equation to whatthe situation is as far as our negotiations with the motion pictureindustry. The motion picture industry producers have the copyrighton the film. It is through collective bargaining that the artist in thefilm receives that compensation, that reuse payment, that percentage,whatever.

I am not frightened by this kind of split. For one thing, as hasbeen stated earlier-and I don't think that it's any oreat secret-I mean, you know, there are compromises that mut e made, andif it's got to be 2 to 1, it's better that it's 2 to 1 on our side than 2 to1 on the other side, and we can negotiate. If the recording companyhas a percentage of the copyright, and it is negotiable through collec-tive bargaining, then that doesn't disturb me. It doesn't seem a prob-lem because it is stronger unions that cin take care of those issues.

Mr. DANIELSON. And strong presidents and strong unions can helpin that, I imagine?

Miss NoL.N. Well, we do our best.Mr. DANIELSON. I do have a question, Mrs. Miles, for you. In your

presentation, you mentioned not onlv vocalists and musicians, etcetera, but you mentioned technicians, I believe.

Mrs. 3ILES. That's right, I just don't think there are thatmany people involved in the making of a recording that it would bethat difficult. And I think that we re trying to find perfection, andwe're not going to find it. I think it's important to implement somesoit of formula here and go ahead with it and then work it out on apiece-b piece basis like Kathleen was talking about.

Mr. DANIELSON. But you've mentioned musicians, vocalists, yousay dancers, actors, producers, directors, technicians. Most of them,their product is not audible as it comes off the record, but withouttheir help you wouldn't have much of a record. Do you mean youfeel that this should be broad enough to include persons other thanthose who create a sound?

Mrs. MILES. I think that we're talking about two differ-ent things here. When I say composers, directors, I mentioned all thepeople that I do know in the industry.

Mr. DANELSON. You don't mean to include those within thisroyalty?

Mrs. "MILES. I think in the recording industry we should talk aboutsound.

Mr. DANIELSON. All right.Mrs. Mius. Because there will be enough things to get peo-

ple off the track on this without our helping them.Mr. DANIELSON. Well, the word "technicians" has come up a num-

ber of times.Mrs. MILES. But I do think that technicians that are

involved in the making of a phonograph certainly should be involvedin this.

Mr. DANIELSON. What do you mean by "technicians"?

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Mrs. M ILES. The producers that produced the record, thepeople that technically make it because without those people-Imean I've seen so many variances in one recording to another whereit comes to the type of recording, and it depended on a technician.And I do think that they're very important. They play a very im-portant part in this.

This morning, also, if I may interject something, it came out abouthow a very few people are the ones that collect or the ones at thevery top. And what we're looking at is a gross revenue; we're notlooking at bottom lines I do think it's important to think in termsof bottom lines because those people have to pay so many people inorder to keep their image where they are and to keel t1hem going.They're like baby companies, and what they get in the end is notthat much, and they have to keep up this image of being very richbecause people read about them making millions and millions of dol-lars, and it's going to attorneys and accountants and PR's and dressesand stagings and-

Mr. DAN1ELSON. Someone told me, ma'm, that sometimes you geta paycheck, and when you look at it you can't believe it's your ownpaycheck.

Mrs. Mi~m. That's true, and a lot of them are spending it at therate of the gross.

Mr. DANIELSON. For the record, Mr. Farrell, could you explain onpage 6, paragraph 1 of your statement, you say:

What also is at stake here is the opportunity to encourage the Americanconsumer to participate to his highest interest levels in enjoyment of the artisticproduct by avoiding undue and unjust costs where possible.

How would this bill make entertainment or artistic enjoyment anycheaper?

Mr. FARRELL. Well, I think the way I say it, I'm not addressingmyself to being cheaper. Wherever tlere's ways to make it less ex-pensive then it becomes, I think that's an important matter whenyou're talking about consumerism. Where I picked this up from wasin partially my own thinking in earlier times about the costs of goingto live performances, and it quite clearly was a relationship betweenthe costs of performance and a lot of Americans who had some in-terest. But it could be a squelched interest by the cost of going toa performance. And then, when I read the statements by the ton-stner Federation of America who made a point that the consumerbuys the records for personal use, finances the creation and produc-tion of the sound recordings, it seems equitable that commercial usersshould pay a performance royalty to the creators of the sound record.It does make sense to me that those who are making a profit couldin some way be participating in the increasing cost of-getting record-ings to the American people.

Mr. DANIELSON. I see your point.Mr. FARRELL. May I continue?Mr. DANIELSON. Surely.Mr. FARRELL. Earlier it was mentioned- that classical music goes

through a few stations, comparatively, and is listened to far fewertimes than pop. It seems to me that is a peculiar argument because it'sthe encouragement of all kinds of sound recordings that we're talkingabout. It's the folk, the jazz, the rock, the types of country, other kinds

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of recordings that are all involved here. And the system that you'recontemplating does something toward a contribution to the cost ofall of those things which do not have as much commercial return tothem for the recording artist or the recording company.

Mr. DANMELS0N. I see your point. What I was searching for wasprobably one other good usable argument in support of the bill, andalthough there's merit in what you say, I don't think most peoplewould get the point; so I'll just not use that argument, that's all.

Mr. KASTEN3MER. The gentleman from Illinois, Mr. Railsback.Mr. RAMSBACK. May I just say that I was going to ask about the

practice in other countries as far as their payment of performers'royalties. But I see that we have Stan Gortikov coming tomorrow whois really the president of the Recording Industry Association, and I'mgoing to ask him what the practice is in other countries like WestGermany, United Kingdom, Denmark. I'm not certain that they paythe recording companies' part of that performers' royalty. When Mr.Fleishman gave that example, I wanted to take issue with him, but Ithink maybe Mr. Gortikov, tomorrow, can really go into that. I thinkthat's kind of a new concept. Does anybody happen to know offhandwhether they do or not?

Miss NOLAN. Sure. Chester knows.Mr. MIODEN. It's different in different countries. Sometimes they

share, aid sometimes they don't, although I've never heard the practicethat he described of the institutions sharing. That's new to me. Butrecording companies share in some countries.

Mr. RALSBACK. Some recording companies?Mr. MIODEN. In some countries.Mr. RAILSBACK. May I just say that I thought the panel's testimony

was very helpful and very constructive.Mr. MARTINDALE. It's my understanding that 45 of the 51 nations

granting performance right as a matter of law also grant somethingto the producing company, apparently.

Mr. MIDEN. I would agree with that. There are other problems,though. internally, for example, between-

Mr. KASTENMEIER. Would you come forward.Miss NOLAN. Come up here, Chester.Mr. DANrELSON. Mr. Chairman, would the gentleman state his name

for the record.

TESTIMONY OF CHESTER MIGDEN, SCREEN ACTORS GUILD

Mr. MmDrwN. I'm Chester Migden, executive secretary of the ScreenActors Guild. We are very active in world artist affairs, and we dohave a familiarity with a ot of the problems inherent in this. One ofthem that was going through my mind as you were talking- is thatthe division sometimes is difficult. For example, the actors had tonegotiate with the musicians as to what a proper share would bebetween those two groups. And, for a long time, money was beingwithheld until that could be resolved. That was resolved last year.Indeed, we were present while it was negotiated out-very, very fairlyWe all felt-between the actors and the musicians. So the problems getrather deep. Once you even adopt it, distribution within the perform-ing group has to be determined. But basically it has worked in Europe.It has worked very, very effectively. And while the sums of moneyhave been small, we all concede the recognition of the principle.

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We tend, I think, certainly when you listen to the broadcasters, youthink that this is going to be the biggest bonanza that ever hit per-formers. Not so. The amounts, when divided, are very, very small andvery, very modest, but at least as a recognition that there's some equity.There's a sharing of revenues received because of use. I must sayeverybody should be aware that if they do have illusions that this isgoing to be some kind of enormous bonanza, it just isn't so.

Mr. RAILSBACK. Not only is it not going to be a bonanza, some peopleare predicting that the administrative expense itself may eat up prac-tically all of the royalties which I understand why the broadcastersare a little bit upset about that.

Mr. MIODEN. Well, that isn't so either. But I make the point simplyto point out that the broadcast industry, which is doom and gloom, hasgreatly exaggerated their fate.

Mr. MARTINDALE. The other thing that's amusing is to read thetestimony when the shoe is on the other foot, and the broadcasting in-dustry was asking the cable TV industry to pay them a royalty rightThere's some wonderful quotes of the broadcasters testifying. Myfavorite one:

It Is unreasonable and unfair to let the cable industry ride on our backs, asit were to take our products, resell it, and not pay us a dime. That offends mysense of the way things ought to work in America.

Miss NOLAN. That was quoted this morning by Mr. Wolff fromAFTRA, a now famous quote.

Mr. RAILSBACK. That's all I have, and I thank you all.Mr. KASTENMETER. I might say one of the difficulties is, of course,

these are long rights indeed, life plus 50 years, and the corporate com-prises 76 years of unsecured terms. There's a lot of complexity involvedfollowing these rights. There may be other difficulties following allthe people individually who these rights may accrue to in one formor another. I have no hurther questions. Gentlemen?

Mr. DANIELSON. No. But I'd like to thank everyone in the paneland in other panels, both pro and con, for having the patience andthe courtesy to come and give us the benefits of their point of view,and I'm delighted that everyone doesn't agree because it's a lot morefun when there's a controversy to be solved.

Miss NOLAN. Mr. Chairman, may I just say that we are absolutelydelighted that you all came to our city, and the day was fascinatingfor all of us. Thank you.

Mr. KASTENMEIER. Thank you, although T must remind the paneland those in the audience we have another performance tomorrow at9:30 in the morning at which time we will hear from the MusicOperators of America to be followed by the National Association ofRadio Broadcasters and then the recording industry.

Mr. DANIELSON. Mir. Chairman, I can't be here tomorrow, and Iwant you to know I'm not playing hooky. I hope you will make arecording, provided I can play it back.

Mr. KASTEYINER. I realize that.I thank the panel very much for their contribution today, and this

concludes today's testimony. The committee stands adjourned.

PERFORMANCE RIGHTS IN SOUND RECORDINGS

THURSDAY, MARCH 30, 1978

HOUSE OF REPRESENTATIVE%,

SUBCOM1IITE ON COURTS, CIVIL LIBERTIES,AND THE ADMINISTRATION OF JUSTICE

OF THE COMi[ITrEE ON TIE JUID)ICIARY,Beverly Hills, Calif.

The subcommittee met pursuant to notice at 9:30 am in the RoyalSuite of the Beverly Hilton Hotel, Beverly Hills, Calif., Hon. RobertIV. Kastenmeier (chairman of the subcommittee) presiding.

Present: Representatives Kastenmeier, Danielson, Railsback, andCohen.

Also present: Bruce A. Lehman, counsel, Timothy A. Boggs, pro-fessional staff member, and Thomas E. Mooney, associate counsel.

Mr. KASTEINMEIER. The committee will come to order. This isthe second day of hearings on the question of performing rightsin sound recordings, and we're very pleased to have as our first witnessthis morning representing the Amusement and Music Operators Asso-ciation one who has appeared before this committee many timesdating back as far as 1965 on copyright and its effect on the jukeboxindustry.

Mr. Allen, most welcome this morning, and we'll be pleased tohear what you have to say.

TESTIMONY OF NICHOLAS ALLEN, AMUSEMENT AND MUSICOPERATORS ASSOCIATION

Mr. ALLEN. Thank you, Mr. Chairman. I'm Nicholas Allen, legis-lative counsel for Amusement and Music Operators Association, thenational organization of operators of jukeboxes.

I am here to oppose H.R. 6063 both as it was originally introducedand as it would be revised by the substitute 'that has been submittedby the Copyright Office.

We're opposing this legislation on two basic grounds. First, ongrounds of principle. Second, on grounds of the unfair economicburden upon jukebox operators that is implicit in this legislation.

First, as to our objections in principle. Included among the bene-ficiaries of this legislation are record manufacturers who cannot beviewed as "authors" of "writings" within the terms of the constitu-tional grant of authority to Congress, except by stretching those termsbeyond their true meaning. Article I, section 8, clause 8, confers uponCongress the power to legislate, and I quote:

To promote the progress of science and useful arts by securing for limitedl'imes to Authors and Inventors the exclusive Right to their respective Writingsand Discoveries.

(67)

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Even this committee acknowledged that record manufacturers do.not always contribute a copyrightable element to a musical recordingwhen the committee stated in its report on the general revision billthat there are "cases in which sounds are fixed by some purely me-chanical means without originality of any kind," and added:

The copyrightable elements in a sound recording will usually, though not al-ways, involve "authorship" both on the part of the performers whose perform-ance is captured and on the part of the record producer responsible for settingup the recording session, capturing and electronically processing the sounds, andcompiling and editing them to make the final sound recording. There may, how-ever, be cases where the record producer's contribution is so minimal that theperformance is the only copyrightable element in the work, and there may becases (for example, recordings of birdcalls, sounds of racing cars, et cetera)where only the record producer's contribution is copyrightable.

That is from the committee's report No. 94-1476, of September 3,1976, at page 56.

Neither H.R. 6063, nor the Copyright Office's proposed substitute, ex-pressly state that record manufacturers are intended to be includedwithin the terms "owners of copyright in a sound recording" and"author of a sound recording." Nevertheless, it is unmistakably clearthat inclusion of record manufacturers is so intended. By includingrecord manufacturers in this indiscriminate fashion, the constitution-ality of the bill is necessarily thrown into serious doubt.

We oppose the creation of a new performance right for record man-ufacturers and performers, also, on the ground that there should beonly one performance right for any single performance that is playedof a musical recording. If multiple rights are to be given statutoryrecognition with respect to the contributions that are asserted to beembodied in a recording, the most that can be claimed, we believe, isthat a single play of a recording constitutes only one performance ofall such rights. This is not just a matter of semantics. It is at the rootof the question posed by the legislation of whether Congress shouldrecognize more than one performance right in one performance of amusical record, and, so, imposed upon jukebox operators two liabilitiesinstead of one, as in the present law.

We oppose the proliferation of claimed rights of creativity in soundrecordings, also, because this can open a Pandora's box for the asser-tion of many more claims beyond those that are now covered by thedefinitions of the term "performers" in this legislation. In this con-nection, we note the failure to expressly include "record manufactur-ers" in the legislative definitions, thus requiring their coverage to de-pend upon interpretation of the legislative terms, "owner of copy-right' and "author." An even more serious deficiency is the failure toattempt any definition that would identify those who serve the recordmanufacturers in ways that could be claimed as contributing creativ-ity to their recordings. These ambiguities are matters of serious con-cern to jukebox operators as these operators are the ones who will bearthe brunt of any further claims for performance rights that go be-yond those that this legislation recognizes.

Here I'd like, also, to mention another flaw in the legislation that'sproposed, and that is that there are no guidelines that are stated togovern the distribution of royalties by the record manufacturers, thatis to say, to those people who are claimed to be contributors of creativityto the recording. And I'd like to remind the committee at this point

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that there was a similar law in the general revision bill when there wasno attempt to get into and to set out guidelines for the performancerights societies distribution of royalties to their membership and theirlicensors. This is a situation where a congressional grant of authorityhas been given to organizations and entities in the public arena withouthaving gone into their system of distribution and having them disclosehow they distribute their royalties. The only time, to my knowledge,that ASCAP was ever called upon to give such disclosure was back in1958 when a subcommittee of the House Select Committee on SmallBusiness conducted such an investigation. But, even then, the informa-tion that was given by ASCAP to the committee failed to disclose anddisclosed only in anonymous terms the big beneficiaries of the distribu-tion under their system. And we say this is something that Congressshould not lightly pass over, but should require full disclosure andshould be made subject to guidelines set down by the Congress itself.

Our second main point is that this legislation will create an unfairburden upon jukebox operators. H.R. 6063 and the Copyright Office'ssubstitute stops short of creating any new royalty for the beneficiariesof this new performance right. Indeed, the Copyright Office states thatthe present beneficiaries of the $8 royalty under section 116 of thepresent law would be required "to share their pot" with performers andrecord producers.

It is unthinkable, we believe, that ASCAP, BMI, and SESAC aregoing to just sit back and let. new claimants come in and take away theirpart, take away any part of their $8 royalty. Realistically, therefore, weknow this legislation will be vigorously opposed by the performancerights societies unless a new royalty is added to the bill as an add-on tothe $8 that those present beneficiaries claim is theirs.

Realistically, also, the recognition of this new performance right canonly result in added pressures for still greater increases in the $8 juke-box royalty when the matter comes up for review by the CopyrightRoyalty Tribunal in 1980 under the provisions of section 804 of theCopyright Act.

The imposition of any new jukebox royalty at this time would createa burden that would be most unfair to jukebox operators. The new $8royalty has just gone into effect, and the operators are now in theprocess of readitistina to this new economic burden. The CopyrightOffice, too, is only in the beginning stages of notifying operators withrespect to requirements of the new law and in establishing a centralizedsystem for the registration of jukeboxes throughout the 50 States andterritories of the United States. Thus. extension of the scope of the newlaw as is now proposed is patently untimely.

We must remind the committee that jukebox operators are smallbusinessmen and that this industry continues in a depressed condition.This committee recognized this fact in its report on the general re-vision bill in 1976 when it said:

The committee was impressed by the testimony offered to show that shiftingpatterns In social activity and public taste combined with the Increased manu-facturing and servicing costs, have made many jukebox operations unprofitable.

'That. again, is from the committee's remrt of September 3. 1976.It will be re.alled. too, that the jukebox business has declined to stch

an extent that Wurlitzer, one of the American manufacturers of juke-boxes, stopped producing jukeboxes in 1974. Thus, there are now only

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three manufacturers of jukeboxes in the United States. While theoperators' costs are increasing drastically, it is difficult for them tomake changes in prices per play to keep pace with such cost increases.In some businesses prices can be increased by merely changing the pricetag and the changes may not be noticed. In the jukebox industry it is amatter of reducing the number of songs a customer can play for aquarter and also of changing the coin receiving mechanism on every oneof the operator's machines. Also, the location owner must be con-suited and his consent obtained, as he can object to any increase in thecost, to play music that, could e detrimental to his business. Prices oftwo plays per quarter have been established by operators in ,some areas,but. that is by no ineamn generally accepted. In many areas, rfutes are stillat 10 cents per play or 3 plays per quarter, and there are even someareas where the rate remains at, 5 cents per play. Such conflicting andcontinuing pressures have necessarily and inevitably resulted in a gen-eral reduction in the level of operators' income from their operation ofjukeboxes. This economic picture explains why almost all operatorshave diversified their activities by adding amusement and vending ma-chines to their jukebox operations.

We wish to eiriphasize, therefore, the apprehension with which juke-box operators view any proposal that would create a new royalty andthereby increase their royalty burden under the Copyright Act. Webelieve the depressed condition of this industry demonstrates the un-fairness of imposing any such added burden on it.

I would like to remind the committee at this point that the RecordIndustry Association occupies a dual role in this field of musical copy-right.. As users, record manufacturers pay royalties to copyright own-ers. They are subject to a small increase that took place in the enact.-ment of the general revision bill. but they were successful in fending offany substantial increases beyond that. Now, in their other role, as thealleged creators of musical recordings, they are asking Congress for agrant of exclusive rights for themselves. We say the record manufac-turers don't need congressional help. I believe yesterday there was testi-mony to the effect that the record manufacture rs industry grossed some$ billion last year which makes the little old jukebox industry looklike real peanuts. We say the record manufacturers and performerstraditionally have securel compensation for their recordings throughcontractually negotiated royalties, and they really don't need conmres-sional assistance to obtain adequate compensation for their recordings.

As for the performing artists and supporting musicians, the artists,we have been told, are quite able to cope for themselves in securingadequate compensation through contractual negotiations with recordmanufacturers. The musicians union representative yesterday, how-ever, complained of the low pay they receive from the record manu-facturers. Trade papers have reported that musicians throughout theUnited States received a distribution last year of almost $12 millionfrom the Phonograph Record Manufacturers Fund, that being analitime high of the fund's annual distribution to musicians. That re-port was contained in Billboard and Cashbox magazines last June.We believe the musicians' complaint really is against the record manu-facturers and that their proper recourse is to insist on better termsthrough their contractual negotiation process with the record manu-facturers rather than seeking help from Congress to come against the

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later users of music. We submit that, all things considered, juke-box operators should be allowed a considerable period of time to de-termine the impact of the recently enacted $8 royalty before consid-ering the imposition of any additional royalty burdens upon them.

In conclusion, we would like to remind the committee that the newjukebox royalty of $8 per machine per year came about as a resultof a compromise agreement among the parties in interest during thecongressional consideration of the general revision bill. That com-promise was intended to replace the old exemption of coin-operatedmusical performances from performance fees by a fixed statutoryroyalty that would serve as a maximum limit on jukebox royalties.Any increase in the jukebox royalties such as that which is implicitin this new legislation would be violative of the compromise agree-nient which led to the enactment of the new Copyright Act.

We earnestly hope, therefore, that the committee will see fit totake no further action on this bill.

Mr. Chairman, if I may, I was asked by the counsel for the phono-graph manufacturers if I would submit for them, to save the expenseof the extra trip here, their statement to the committee. And, if I mayhave you permission-it's not that long--I would like to read it intothe record.

Mr. KASTENMEIER. Yes. We have it before us, and without objec-tion it will be made a part of the record. Can you summarize it, givethe highlights?

Mr. ALLEN. It's sort of hard for me to do since I didn't write it, Mr.Chairman. But if that is your wish, the thrust of the paper is to pointout the ambiguities in the bill with respect to coverage as to thosewho support the record manufacturers role and to point out theconstitutional problems, objections that are involved in the grant ofa right to record manufacturers.

Mr. KASTNMIER. Yes. I'm reading through it.Mr. ALLEN. The thrust of the paper is to, also, emphasize the diffi-

culties that operators, music operators, will be faced with if they aresubjected to increased royalties. This paper also makes the point, aswe have, that it's most unlikely that this bill will go forward to en-actment without some increase rather than expecting the performingrights societies to accept a diminution of the $8 royalty which they arenow entitled to.

- I believe the manufacturers' paper also objects, as a matter of prin-ciple, to the proliferation of performance rights for any number ofdifferent types of people who will be making claims to creativity inrecordings.

That's about as good a job as I can do of summarizing the paper Ididn't write.

Mr. KASTEN3MER. I appreciate that. I didn't mean to cause you thatdifficulty. I've just read it now, and you are correct. It essentiallydiscusses, in general terms, what they understand to be the constitu-tional purpose of the "copyright monopoly agency," they put it, andthey insist that, particularly with sound recordings that record com-panies are not creators in that sense or authors. They assert an originalcreative contribution and, among others, they quote Senator Ervin tothat effect.

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Thank you very much, Mr. Allen. You are here this morning on be-half of the Amusement & Music Operators Association. Is that asuccessor to Music Operators of America?

Mr. ALLEN. Yes, Mr. Chairman. This is part of the picture of thediversification of the jukebox business to embrace amusement andvending and because so much of the business now is in these lattercategories with the jukebox merely as an adjunct that the nationalorganization realized that the time had come to make the name changeand this was done last year. It is the same organization, however. AndI might add, Mr. Chairman, we have, throughout the United States,about 30-I believe 30 is a good figure-State and local or regionalassociations such as the association in your State of Wisconsin, andthere is such an organization here in the State of California, and it'scalled the Music Merchants Association of California. I was expectingsome of them to be present today, and I don't know if they've come in.

Mr. KASTENMEIER. Are there any persons present, representatives ormembers of the Music Merchants Association of California?

Mr. ALLEN. Without their being here, Mr. Chairman, the Californiaassociation is one of our largest State associations, and I suppose na-tionally, because I suppose California is that big a State. They're veryactive. And, as you may recall, for many years their president was alsoour national president, Mr. George Miler. They would be here, Iknow, if there hadn't been some mixup in the scheduling of the time toindicate their support of the statement of the national organization.WVe have discussed this with them, and I can say for them that I knowthey do support this wholeheartedly.

Mr. KASTENMETER. Do you know how many members there are pres-ently nationally in the Amusement & Music Operators Associationwho. in fact, do have so-called jukeboxes under their control?

Mr. ALLEN'. Mr. Chairman, our membership is about 1,000 1,100operators. We also have in the association some distributor, and I be-lieve the manufacturers are associate members, but the answer there isabout 1,000 or 1,100 jukebox operator members. And, without any ex-ception, now, they all operate machines in addition to jukeboxes. Untilabout 3 years ago there was one exception, and he was from Congress-man Railsback's State. It was Les Montooth, of Peoria. He was the onlyjukebox operator in the United States who operated only jukeboxes,and he operated successfully. None of us could understand how hedid it, but he has retired now; so there are no jukebox operators whooperate solely jukeboxes.

Mr. RAILSBACK. That's Bob Michel's district, whatever place it is inPeoria.

Mr. ALLEN. Pretty close to home, I guess.Mr. KASTE.MIETER. Does Mr. Patterson still represent the manu-

facturers?Mr. ALLENw. No. He became Judge Patterson about 2 years ago, Con-

gressman Kastenmeier. He's retired from this practice and is makinghis home in a private practice in Coudersport, Pa. The Kirkland Ellisfirm. however, still represents the manufacturers, and it's they thatasked me to give their statement.

Mr. KASTENMETER. Maybe you could further identify for the com-mittee, because I'm not precisely aware of it-perhaps even subsequentwitnesses can help us-there was a distribution last year 6f nearly $12

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million from the phonograph record manufacturers fund. Youmight further identify that. Is that a mechanical royalty, or whatfund is this?

Mr. AuEN. No. The manufacturers pay that. That's their otherhalf. That's the half where they pay for music. No, they'll have to an-swer it, but I take it it comes from the royalties they collect, and there'ssome trust fund arrangement that is set up by the industry. I onlyknow the sum total of it.

Mr. KASTEN1EIER. We'll ask the subsequent witnesses who are ex-pert and can fully respond to the question.

Shortly, if not you, Mr. Allen, I suppose others representing juke-boxes, or -will be appearing before the Copyright Royalty Tribunal,and perhaps you can refresh my recollection as to the effect of this bill.They will be considering that during the course of next year, 1979, inadvent of 1980, the germination of whether that rate is change or not,the $8.

Mr. ALLEN. Mr. Kastenmeier, I think the way the bill reads in thatregard, come the 1st of January 1980, someone-I guess it's the tri-bunal. I forget now since they divided that responsibility. Someonethere, by a declaration, initiates the review process, and by giving no-tice to the interested parties. Then, from there, there will be studies,I guess, and hearings. Ve really haven't gotten to that point. With thetribunal we have gotten to the point of the development of regula-tions for access to establishments where jukeboxes are located.

Mr. KASTENMEER. I say that because if there is legislative move-ment with respect to this particular proposal or any variation of it, itmay tend to run into that hearing, as you say, may have an effect onit, and we may do well to consider it. The fee is fixed during 1980 fora term of 10 years?

Mr. AmExN. No. It is fixed in 1980, but then, I believe, other re-view comes up in 1987, I think it is.

Mr. KASTENMEIER. And each 10 years thereafter?Mr. ALLEN. And in each 10 years thereafter. It's a staggered ar-

rangement. You may recall the different industries are going to bereviewed at different times after the first go-around. I guess that'sa matter of the workload of the tribunal. I can fix that date. I be-lieve our first review-no, I was wrong. I guess our first review comesup in 1990. It's the other industries that come up just before that.

Mr. RAILSBAcK. That's right.Mr. ALLEN. I think it's 10 years and 1980. I haven't gotten that

far down the road yet.Mr. KASTF.NEMEIE. Well, if it's 1990, there's no reason for you to.Mr. ALLEN. I probably won't.Mr. KASTENmIRE. I notice that the principal thrust of your state-

ment is to suggest that the recording companies do not require thissort of payment, but you do not nearly so strongly suggest that per-formers do not; that is, musicians.

Mr. ALLEN. Yes, absolutely, Mr. Chairman. You can't argue thosetwo groups, put them in the same category. I don't think it wouldbe realistic or fair either, certainly not.

Mr. KASTE NEIER. Then do you concede that performers do havean equitable claim for some sharing of royalties by some mechanism !

Mr. ALLEN. I suppose I must, yes, yes.

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Mr. KASTENM31EIER. One last question. I asked the broadcasters yes-terday -whether it is, in fact., the case, as asserted by proponents ofthe bill, that, really, only the broadcasters and perhaps the musicoperators are opposing the bill, or at least the general nature of thebill. My question to them: Is that true, or are there others that youknow of that oppose this bill for any reason -

Mr. ALLEN. I do not know, but I think some of us may not havewaked up to how they're involved. The cable people will certainlysomeday be bearing the brunt. Frankly, I have enough problemsfiguring out where we stand on these things without thinking ofothers.

Mr. KASTENEIER. All right. Of course, one of the reasons I askedthe question is to try to identify those in interest who may be affectedand whether or not they appeared or have been invited to appear sothat there is yet an opportunity for people to comment on this issue.

Mr. ALLEN. I think this, that whatever is done to impose the Gov-ernment into the economic process, creating rights and creatingroyalties, realistically, the fact of life is that the ultimate users willbe the ones who are going to have to pay. It's inevitable that costswill be passed on the ultimate consumers, and the ultimate consumersare the members of the public. So, while you don't, hear-at least Idon't hear-complaints from those directions, I think it's just be-eause the public hasn't any reason to know about this yet.

Mr. KASTENMEIER. Thank you, Mr. Allen. I yield to the gentlemanfrom Illinois.

Mr. RAILSBACTc. Thank you, Mr. Chairman.Mr. Allen, I happen to agree with your statement on page 5-if

you could refer to your formal statement-where you suggest thatthe legislation is apt to be vigorously opposed by the present bene-ficiaries, that is, the performing rights societies--ASCAP, BMI, andSESAC. As I look at the bill, and even the Ringer draft, it seemsto me, if I read it correctly, and I think it's a little bit complicated,but it looks to me like there's simply, in your case, taking the fundsthat you contribute, they're requiring now that those funds be di-vided and that the performers will derive, and the copyright holderswill derive, half of the funds that have been contributed under theother mechanism. Is that they way that you read that?* Mr. Ajnr. Mr. Railsback, sure I read that as the way the bill is

now. I have a little difficulty reading some of it, too. But just go backa few years. When this first surfaced. this proposal for performanceright for recording artists, I think that's the way we talked aboutit. g

Mr. RAmSBACK. I'll let you go back, but I want to pin this down.Mr. ALLEN. I'm answering this question.Mr. RALSBACK. Is it not correct that they're asking. under the bill,

that there not be any increase in payment from the jukebox peopleright now?

Mr. ALLEN. Right now. And I'm saying that the performing rightsSocieties are not going to sit back and let that happen without comingin and protesting. They've made this statement before. I could findit in one of our earlier records where they said we will onpose thisbill provided-provided it does not cause any loss to us in the royaltythat we've got. I don't know if ASCAP's present here today.

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Mr. RALSBACK. What I mean to be doing is agreeing.Mr. AirEN. Thank you.Mr. RAiLSBAcx. No, I think your assessment is correct. Then I have

the further problem that if we are going to recognize a performer'sroyalty for public performance, public commercial playing of rec-ords, you know, if I end up buying that concept, I'n just going tobe candid witdi you and say that it would seem fair to me, then, thatthe jukebox industry would, under the same rationale, be expectedto contribute to the performers' royalties something over and abovewhat your contribution is now.

Mr. ALLEN. Right.Mr. RAILSBACK. So I'm just being very candid with you. I think

the rationale is there and that you'd be expected to do that. But-I'm just curious-what is the economic situation of the 1,100 opera-tors? And do you have any idea what their gross revenues are andwhat the net revenues are so forth?

Mr. ALLEN. Our industry statistics are not good, CongressmanRailsba.k. Looking through the records, and I know you'll see somecontinuity going way back many years, there have been two economicsurveys in the course of the general revision bill. One preceded in1958, I believe, and the other one was in 1967. They sampled a crosssection of some 1,000 to 1,500 operators at those times, and they gotfigures which showed the picture of gross and net. I don't have thosefigures with me today.

Mr. RAILSBACK. Could you get those for us, do you think?Mr. ALLEN. I'm going to do better than that, maybe.Mr. RAILSBACK. All right.Mr. ALLEN. We're recommending to our board of directors meeting

next week that a survey be made, an economic survey. We know weneed it. We know we'll be needing it in 1980. The figures are presentedin your own reports, Congressman Railsback. The only figures we havenow are in the committee's report, the one that I've cited.

Mr. RAILSBACK. If I may, let me just suggest this to you: Under theDanielson legislation and under Barbara Ringer's draft, we are talk-ing about certain annual payments to be made by the broadcasters or

the television stations and so forth. Generally speaking, it's for, say,radio broadcasters under $200,000, a range figure that would be, Ithink, probably less than 1 percent, anyway, of their gross revenues.And then once they reach the $200,000 gross receipts figure, if ny recol-lection serves me right, it's something like 1 percent of their net re-ceipts which would permit them to--Im not exactly sure of the for-mula. But, anyway, I think it would be very interesting for us, indealing with this, to have some idea of what we're talking about as faras revenues derived from a jukebox.

Mr. ALLEN. We want to get that information. It's very difficult. Ihope you appreciate these small outfits-

Mr. RAILSBACK. No, I understand.Mr. ALLEN [continuing]. Ordinarily don't divide, set up their box

to differentiate one type of a machine from another. We'll have quitea job to do this.

Mr. RAILSBACK. Right now, are all of these jukebox operators man-datorily licensed?

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Mr. ALLEN. I would say yes, without exception, yes. It may be State;it may be county, but I think they're licensed everywhere.

Mr. RA1SBACK. Well, I would think, for instance, under the copy-riglht law, aren't they expected now to pay $8 per box ?

Mr. ALLENs . Yes.Mr. RMiLaAcK. I'm very curious what information they are re-

quired-I know the Federal Government burdens everyone with paper-work. I'm very curious as to what information they must report inmaking that even $8 per box payment. I wonder if they go into anyrevenue figures there?

Mr. ALLEN. Those, I'm sure not, and I believe I'm safe in sayinwz-that's based on the very language that the committee put into the billbefore it was enacted. there is a reference in there to this type of prob-lem. There is something in there to the effect-and I don't put myfinger on it right now-that without adding any burden to the opera-tors by way of recordkeeping.

Mr. RAILSBACK. That's good. I'm surprised we did that, but that isgood. I'll tell you what: It would be helpful to us, in trying to be fairto everybody concerned, I think it would be very helpful to us in try-ing to understand what revenues are derived from jukeboxes so that wecan try to be fair in whatever we decided to do, if anything.

Mr. ALLEN. I will be glad to tell you that this is in the same area ofyour inquiry, how the thing is going now, the registration process. TheCopyright Office has very wisely limited the information, that's re-quired on the forms and instructions they put out, just to what the billsays: Identification of jukebox by serial number or by other means, andthat's it, except paying $8. The registration process is off to what Ithink is a really slow start, and I hope that's all that it means. At thispoint in time I can give you some figures that might be of interest.These figures are about 2 days old from the Copyright Office. Theyreceived $721,000, almost $722,000 in the $8 royalties, representingabout 90.000 jukeboxes from about 2,000 operators; $722,000, 90,000,and 2,000. We have estimated a greater number of jukeboxes through-out the United States than this. The reason is not clear to us, nor is itto the Copyright Office. Our association has assisted in getting the in-formation out to all our members and through the State organizationsto all the State organizations' members, and we believe that the 2,000figure pretty well reflects what the membership has done. It does notexplain the great disparity yet.

Mr. KASTFNM1mER. If the gentleman will yield?Mr. RAILSBACK. Yes.Mr. KASTENMET . I had heard figures similar to this. We had also

predicated the bill on approximately 500,000 boxes through the yearsfrom 1960 to 1975, and 90,000, as yot indicate at least, falls far short of500.000 jukeboxes.

Mr. ALLEN. About the time the bill was passed, we were providinginformation to the committee. We were saying 400,000 to 500,000, Mr.Kastenmeier. We knew there was diminution. Whether we were offon that-we could be, but I think it's also very likely that the informa-tion hasn't gotten out sufficiently to all the operators of the UnitedStates. Hopefully, that's what it is. At any rate, we're recommending,also, to our board of directors that the association conduct a surveythrough the State licensing authorities that Congressman Railsback

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referred to see what kind of account we can get. We're concerned aboutit.

Mr. RAILSBACK. Well, I thank the gentleman. Thats all I have.Mr. KASTE.NmETR Actually, I did not raise that issue because I don't

mean to burden these proceedings with it, but that is, of course, ofinterest to the committee.

Mr. AuN. Mr. Kastenmeier, I'd like to add to an answer I gave youjust before about the performer. That's my personal view that a per-former, at least many performers in many instances do provide cre-ativity, but I don't want to overlook the argument, the view as ex-pressed by Senator Ervin very strongly during the debates that a per-former is more a user than he is a creator. And, in the constitutionalsense, there may be still that issue that has to be faced.

Mr. KASTENMEFE. I appreciate that as a comment, and the commit-tee thanks you for a very professional statement today, Mr. Allen. It'salways good to have you before the committee.

Mr. ALLE.. Thank you, sir.Mr. KASTENMEIMR. I'd like to acknowledge the presence in the room

of another former witness who is not appearing today, but once ably,for a very long time, represented ASCAP, an&I'm sure jousted withMr. Allen and others for many years on legal issues, legislative issues,and that's Herman Finkelstein in the back of the room by coincidence,here in Los Angeles, in this very hotel today. And it is coincidence: lieno longer represents that particular organization.

I should like to say-I might have said so yesterday, perhaps some-what gratuitously-my view that despite the fact that people feel verydeeply about these issues and sometimes get carried away in their char-acterizations of the opposition, that I have also found in the 15 or 16years we have had hearings and had dealings with people interestedon the various sides of copyright legislation, that the organizationsand people that represented the organizations were, I think, of in-credibly high professional and personal character. Sometimes we liketo think of the other guy as sort of a bad guy denying something tosomebody else, but, actually, it's been, at least for me, a joy to work inthis field and work with the people who represent organizations of alltypes and all sides on this issue.

I'd like to call now, representing the National Radio BroadcastersAssociation, Mr. James Gabbert, who's president of KIKI in Hono-lulu, and Mr. John Bayliss, who is president of Radio Division Com-bined Communications Corp. We have a comment by the NationalRadio Broadcasters Association submitted by Mr. Gabbert. Would youlike to go first, Mr. Gabbert?

TESTIMONY OF JAMES GABBERT, NATIONAL RADIO BROADCAST-ERS ASSOCIATION, ACCOMPANIED BY JOHN BAYLISS, RADIODIVISION COMBINED COMMUNICATIONS CORP.

M r. GABBERT. Yes, Mr. Chairman. I can save everybody the time ofreading this since it's entered formally in the record, and I'd like toexpandon this, if I may.

Mr. KASTENMEtE Your statement Will be received in the record.Mr. GABBERT. The thing that concerns me here, if I came along and

said that radio broadcasters could not afford this, I don't think I could30-51078-6

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back that up. We would oppose it, but I think, ultimately, if such feewere imposed we would just pass it along to our advertisers, and itwould ultimately end up at the consumer store.

But I think one thing that is important, as in our comments-a wordI just love-is the symbiotic relationship between the music industryand the record industry and the radio industry. There was a changethat occurred in the late fifties, early sixties, and that was the adventof top 40 radio which changed the picture of radio dramatically. As amatter of fact, I would recommend that everybody on the subcom-mittee, not because it's a work of art, but that they go see "AmericanHot Wax" which is now playing around at theaters because historicallyit shows the impact that the radio industry had on the record industry.At this time, when top 40 radio started at popular music stations, therewas an emergence of new labels. Up until that time there were justbasically RCA, Columbia, Decca, the major labels. All of a suddenanybody with a recorder could start a record company, and all theyhad to do was get record airplay and have one hit, and they had arecord company. A lot of companies started at that time which are nowestablished, large companies. This can be directly traced to radio playand exposure on the radio.

Another event which occurred in the mid-sixties was the FCC'smandate of nonduplication where FM stations and markets in excessof 100,000-that was the first cutoff-could no longer duplicate AMprograms. They had to separate. This created a plethora of program-ing unprecedented in America. For instance, in San Francisco, whereI own two stations, we have now 76 radio stations, all playing differenttypes of music-jazz, classical, rock, various shades of rock, popularmusic, beautiful musi, , what have you. It's given the general publica plethora of music and choice.

At the same time this has happened, you go and you look at recordcompanies profits and sales, and there's a direct correlation. For in-stance, and I quote from CBC's stock report:

The U.S. recorded music industry sales claimed an estimated 22 percentduring the year of 1977 following an unprecedented 18 percent In 1976.

Basically, record sales are booming today. At the same time this hashappened, a very interesting thing in record stores: Once upon a timewhen I was a kid, and I'm sure all of you would remember going toa record store, the had listening booths. They would sit there, and youwould take a record-"I want to hear the latest Patti Page record,"and you would go in and listen to it. They had records allocated specif-ically to listen. No longer do record stores have listening booths. Why?How can a consumer go out and buy an album for $5 or $6 withoutknowing what that product is? How did they find out what thatproduct is? Radio airplay. There's a definite value that radio airplayoffers to the record industry. And that's why I say it's a symbolicrelationship. I'm not saying that we could exist without the recordindustry, but I do feel they would have a lot of problems existingwithout us.

Now, in a free marketplace we would be able to charge the recordcompanies for exposure of their records. This is what could be called"payola," and if you go back we are prevented from doing this. I'mnot saying this is good or bad, but in a deregulated free marketplace,we would problably get more money from the reco) ,d companies to

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,expose their product than we would pay in royalties back. This ishypothetical, but I believe it to be true just in what we're doing inrecord sales.

Mr. RAILSBACK. Mr. Chairman, could I ask a question?Mr. K sTENEmn~. Yes; in fact, I was going to ask a question.It might be useful for you to describe "payola." It's a sort of an-

cient term now and presumably has been outlawed. But could youbriefly describe what the P ractice was, to make your point?

M r. GABBERT. "Pa yola" was the practice where the record companieswould pay either a disc jockey, program director, or somebody wouldreceive either monetary or in terms of some type of compensation,remuneration, for exposing a record on the air. Today it's not in theform of "payola," it's in the form of-like our stations in San Fran-cisco are hounded by record promotion people. I had to create a specificposition with this person that isolates or insulates the disc jockeys andthe air people and the people who make the music selection from thepromotion or the "hype" people.

Mr. KASTENM-EIER. Is it proper or appropriate for them, record com-panies, to give you free records?

Mr. GABBERT. Oh, yes, in fact, I counted last week alone there wereover-last week it was 300 singles or 250 singles that were releasedof total types of music. And, in a market like San Francisco, we'vereceived a lot of these. A lot of markets don't. Smaller market sta-tions have to buy their records.

Mr. BAYLIss. Most of them.Mr. GABBERT. Of the 5,000 or 6,000 commercial stations, more buy

them than don't buy them.Mr. KATZEN MMER. I'd like to yield to the gentleman from Illinois.Mr. RAILSBACK. I know what you are saying, and I agree with what

you're saying about tjie benefit derived from the fact that radio broad-casters certainly makeknown to the public the good music. But then Ithink we have to take it a step further. Who really benefits from recordsales? And it occurs to me that, all right, No 1, the record companieswould benefit from an expanded sale of records. Second, a performerwho may have an agreement, a royalty agreement, that top performerwould benefit. But I really wonder if the other musicians derive anykind of a benefit from the expanded record sales because they get rightnow any kind of a royalty. So I'm just curious how you feel aboutthat.

Mr. GABBERT. Well, I see this is a problem between the employerand the employee, the employer being the record company and theemployee being the- performer. You look at record company profits,and if they're not sharing them with the celloist, it seems to me that'sa problem between those two.

Mr. RAIhSBACH. Is there an indirect benefit derived by the musicians,do you believe?

Mr. GABBERT. Yes, because records, you go back to, as I was pointingout, the record sales, and as long as records are still being manufac-tured. Now, getting away, because in popular music you get clear doc-umentation of how radio is and Elton John is making millions ofdollars.

Mr. RATLSBACK. I know that.Mr. GABBERT. But an interesting fact I found out yesterday, there's

.a concert music broadcasting station. And I called RCA's marketing

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division, and, unfortunately, I don't have the exact figures with me,but there's a definited correlation in classical music sales in a marketthat has a classical music station vis-a-vis a market that doesn't haveone. It's dramatic. So it would affect every type of music sale.

Mr. RA]LSBACK. You do not deny, I take it, that at the same timethe record companies may be deriving a benefit. In fact, I think you'reconceding in your statement, by the same token, even the fact youmay get free records in a record company which records may bepleasing to your audience, that that certainly benefits the radio broad-casters. That benefits you, too.

Mr. GABBERT. That is correct. But the free records themselves-moststations today in the pop music formats run on what are called rela-tively tight play lists; so the quantity of records they give you, lotsof records, most of those end up being thrown away. So the valuethere is small, I think.

Mr. BAYLISS. Yes.Mr. RAILSBACK. Well, now, the value is you have your choice of

those that may be a hit or those that may be very well received by yourlistening audience. That certainly helps your station.

Mr. GABBF.RT. That's true.* Mr. BAYLISS. I don't know if I can help. I tied to respond to thiswith Jim. I don't know that I understand where you're going, sir.

Mr. RATISBACK. I'll tell you exactly. I don't mean to poorly char-acterize what you're saying, but a lot of broadcasters seem to be say-ing we do a tremendous service for the performer. by playing their-work and making public their work. and that results in sales. I guessthe only thing that bothers me a little bit: At the time you're makingthose statements, at the very same time you are directly benefitingyourselves from their work product.

Mr. GABBERT. This is true. I think you could call that a trade-off.That's a value for value. I can't sit here and say that we're doing thisout of the kindness of our hearts.

Mr. RAILSBACK. That's what I thought. You kind of conceded thatin your statement. It is a trade-off between the record companies andthe broadcasters. The question I have is: Do the musicians actuallybenefit, the backup?

Mr. GABBERT. Isn't that a problem between the record company andthe musician?

Mr. RAILSBACK. I think it is a problem. We are confronted withthe question: Do we want to recognize the creative talents of some-body that may not be, say, the top performer, but they may be atalented musician I Do we want to motivate musicians? And are theyentitled to any kind of a royalty? I have reservations about recordcompanies sharing in a performer's royalty. I do.

Mr. GABBERT. Well, I see a performer basically as an employee. Icould be a performer as a broadcaster. I'm a broadcaster. And I'm ableto negotiate what salary I take, and I work it out on the free market-p lace. And, it seems to me, a performer, whether you're a good per-ormer or a not so good performer that that is your trade, your stock;

that is what you do for a living. And I have trouble with a law thatwould come along and say, "All right, guys, we're going to give youthis because we feel you deserve it," because I would sit here as abroadcaster ..aying, "I serve the public interest. Why don't you pass.

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a law giving me more?" The record company profits are so huge thatit seems to me what the performers need is a stronger union. It seemsto me, basically, a free marketplace problem.

Mr. BAYLISS. The gentleman that preceded us said basically thesame thing, and we would concur with that. If there is, in fact, an in-,equity in the system, it seems that a difficulty lies between the ne-gotiated area between the performer, the artist, and the recordingcompany.

Mr. RAILSBACK. That isn't exactly what lie said. I think what hesaid is that I recognize there maybe should be a benefit for the per-former, but I have problems-I'm speaking for myself-and then hesaid there may be constitutional problems, in other words. And thenlie pointed out Senator Erwin's statement saying that this was not anarea constitutionally was meant to be protected. I think the precedingwitness very candidly said there should be a difference between recordcompanies and performers.

Mr. BAYLISS. Well, again, though, I think that what we would con-cede to in the general text of the statements submitted on behalf of theNational Radio Broadcasters Association is that, really, the performerneeds the recording company and the broadcaster needs the perform-ing artists and the record company, and they, together, in unison,need i1s.

The business of whether we get free records and then use thattalent and expose it oi, the air to our own personal gain-I don't thinkthe general, major market broadcaster would have any problem withpaving fo records outright. Some do. Some will not accept any freerecords at ai! just to avoid any undue influence in their own mind asto what they Cimould or should not be playing on the air. The trade-offthere is, in the case of a classically strong artist with hit after hit afterhit in a market the size of Los Angeles-take an Elton John record for$6, expose that on one of the dominant stations here. That could wellresult in a half million dollars in sales of that record in this particularmarketplace.

Mr. RATESBACK. Just to be very realistic, the way these bills aredrawn, and I am not a cosponsor of any of the bills, but the way thatbills are drawn, the Elton Johns and the Frank Sinatras who shareequally with the little guys that contribute their talent-they're notfat, cats. They don't get the big royalty payments.

Mir. GABBERT. We did an interesting thing which is not completedyet, but we stalled logging a lot of our member-stations on recordsplayed per week, and we intend to log about 200 radio stations coastto coast on the records played, numbers it plays. So far, just this morn-ing, I was handed the results of nine stations. There are some interest-ing figures. You see, the FCC has limits on the amount of commercialtime we can run on a station, and if Elton John bought time for usto play a record, that would basically be a 3 or 4 minute commercial,and if we assume that each record played on the station, if we wereto bill the record company for exposure on that-most records todayrun about 4 minutes: so let's count it as 2 minutes and take an averagespot cost--we came up with figures like in San Diego, $169,000 in aweek; or in Phoenix, $70,000, or in Los Angeles, $479,000. The totalover a million for nine stations.

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Mr. RAILSBACK. May I just ask if You were to bill Elton John for-that kind of time on a commercial basis?

Mr. GABBERT. At a trade-off, assuming that 2 minutes of it wouldbenefit us, and 2 minutes would benefit him.

Mr. RAiLSBACK. Do you know what Elton John would do? Hewould buy a radio station and play his music and capture your-audience.

Mr. GABBERT. That's called the free marketplace.Mr. BYrIss. I don't know that people would want to listen to Elton

John 24 hours a day.Mr. RATLSBACK. What he would do is team up with Olivia Newton-

John, and I would tune in, too.Mr. BAYLTSS. Sounds like a great idea.Mr. GABBERT. This is interesting talking about record sales which

you can correlate, again, to radio play as in MCA's report on theirrecord industry in 1977 in the fomth quarter. Three albums sold over amillion copie---Elton John's Greatest Hits. Olivia Newton-John'sGreatest Hits, and Lynyrd Skynyrd's Street Survivors, those weregetting maximum air play at that time.

So, in summary, what we're really saying is, I think it would beunfair to assess a fee to us on a performer's royalty fee when we aren'tallowed to charge them for the value of what we're giving them; soI consider it a trade-off.

Mr. BAymss. And we should point out, too, again, that for themajor market broadcaster, whether it's a dime a week or $100 a week or$1.000 a week. that really isn't the issue.

The issue is the principle of the thing: Should something like thisbe done? The real, the adverse effect, I think, while it would imposesome difficulties for any broadcaster, the broadcaster who is going tofeel the real heavy thrust of this is going to be the small market broad-caster, and the small market broadcaster makes up, I would say, about75 percent of all the radio stations licensed for commercials use in thecoimtry where they, in essence, go out and buy the records that theyplay on the air, and they expose the product ol the air. Then, throughtheir licensing agreements, they pay the various licensing agencies-ASCAP and BMI and SESA-and then in the proposed legislationthey would turn around and pay again. And the cost for their par-ticipation there might well mean the difference between adding a news-person in that station.

Mr. RAILSBACK. Now. where you're talking about $250 a year ifyou're under $100,000. or $750 a year if you have up to $200,000,between $100 and $200,000; so you're not going to add another news-person for $2:50.

Mr. B.TASS. In a small market, you would be surprised what youcan add for $250.

Mr. GABBERT. Excuse me. I paid myself $68,000 last year, andASCAP and SESAC fees-

Mr. RAILSBACK. Ii not talking about the reijulat copyright liabil-ity. I'm talking about the royalties that would be paid under this bill.It's $250 under $100,000 in gross receipts. You're even exempt if you'reunder $25,000, and then, if you go up from $100 to $200,000 it's $750..It's a total payment, as I understand it. of $750 a year.

Mr. GABBERT. Wasn't it 1 percent when the gross exceeded-

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Mr. RAILSBACK. Then if you're over $200,000, its 1 percent of yournet receipts, deducting your sales commissions. I'm not sure, by theway, if the formula is correct, but we're not talking, under the bills,

-about a lot of money. But the people yesterday said we're concernedabout the foot in the door.

Mr. GABBERT. The camel's nose in the tent. There is, I think, goingback, income tax was an experiment. It was not going to hurt verymuch, and ASCAP and BMI fees at one time were not significant,and these things do have a way of getting out of hand. ASCAP feeswere, according to Billboard magazine had a record of 270 some mil-lion dollars. It was a smash in the record.

I'm a free marketplace advocate. I have trouble with the concept.It's not the monev. I consider that the performers are, as I mentioned,craftsmen, and the record companies are the employers, and theyshould just go on strike and fight for more money. The record coin-panies are making a lot of money; so I guess that wraps it up.

Mr. KASTEN IUI. Mr. Bayliss, do you have anything separately ?Mr. BAYLISS. NO, I'm just chiming along saying, "ie, too."Mr. KASTEN.Enm. All right. May I inquire, yesterday we had a

number of radio representatives here, essentially. under the auspices ofthe NAB. As members of the National Radio Broadcasters Associa-tion. how do you differ from them in terins of either their viewpointso their interest?

Mr. GABBERT. Well, just the associations are different in the factthat we represent radio stationsonly.

Mr. K.\sTE.N3 rIEP.. Exclusively ?Mr. GABBERT. Exclusively. And the bulk of our membership is small

operator? , independent operators, and by the NAB we're considereda rebel organization, but I think on this we would concur, and, again,we have trouble with the principle of it, the concept.

Mr. ]KASTENMEEIER. But, actually, on this point you're in total agree-ment with them? As a matter of fact, I think only radio broadcasterswere represented, and, in a couple of cases, very small stations. Iasked them the question if there was anyone else in the interest otherthan perhaps the music operators, jukebox operators, and radio broad-casters who opposed this legislation. I don't think they indicated thatthey knew of any other organization, group, or interest. Do you?

Mr. BAYLISS. In the form of organized opposition? No, sir.Mr. KASTENMEIER. Organized or unorganized.Mr. GABBERT. Can't think of any.Mr. BAYLISS. I'm sure that the general public is not at all aware

of any of this and may have some difficulty in understanding it at all.Mr. RAILSBACK. I think you're right.Mr. KASTEN31EIER. Do you think the general public, if it did under-

stand the issue, would take sides? If so, why? 'What sides would theytake?

Mr. BAYLISS. I don't know that I can answer that question fairly.I have a pretty strong view that the general public would be morefor the good old American enterprise system and overwhelminglysupport us in the fact that this is a free enterprise matter and a mat-

-ter between employer and employee.Mr. GABBERT. I did an editorial in San Francisco on it, and, of

course, the editorial was against it, and it generated lots of bravos.

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And I explained the value that a radio station has to the performerand how the performer benefits, and it's a mutual trade-off.

Mr. KAS TuNmEim. Did you provide equal time?Mr. GABBERT. Nobody asked for it.Mr. KASTENMVTEIER. I think that's all the questions I have, and I want

to thank you both for appearing here this morning.Mr. GABBERT. We appreciate it. Thank you very much.Mr. KASTENMEIER. Id like to, at this point, ask Mr. Allen, who is in

the audience and was a preceding witness-he said that he hoped therewould be present this morning some representatives of the CaliforniaMusic Merchants Association. I'm wondering if those folks have shownup yet.

Mr. ALLEN. Yes, Mr. Chairman.Mr. KASTENMEWER. Would you like to introduce them?Mr. ALLEN. If I may introduce our California respresentatives, here

is Mr. Gabriel Orland who is the executive vice president of CaliforniaMusic Merchants Association and also a member of the board of di-rectors of our national association. He's from Glendale and operatesjukeboxes throughout this area. Then there's Mr. Carl Fisher who isfrom Inglewood and is also an operator here and is a member of the

board of directors of the California Music Merchants Association.They understand our statement and are here to support it. Mr. Or-land might speak to that point.

Mr. ORLAND. As a member of the California association, CMMA,which is California Music Merchants Association, we would like tooppose H.R. 6063.

Mr. KASTENME ER. Go on record in opposition?Mr. ORLAND. Yes, sir, along with supporting our national associa-

tion which I am also representing today in opposing this bill. And Ihone that you gentlemen will go along with our opposition.

Mr. KAsP-ENMEIER. Your point of view was very well representedby Mr. Allen earlier, and if you have any statement you care to filewith the committee, we would be pleased to have it.

Mr. ORLAND. All I want to do is oppose the bill. I think it's unfair,unjust, and unconstitutional.

Mr. IASTENMEIER. Well, I won't call upon you for a constitutionalattack on the bill.

Mr. ORLAND. Just my opinion.Mr. KASTENMErER. All right, Mr. Orland, thank you for appearing

here today, and your presence and that of Mr. Fisher are acknowl-edged.

Now, at this time, I would like to call on representatives of the Re-cording Industry Association of America. Mr. Stanley Gortikov, Mr.Alan Livingston, Mr. Stewart, Mr. Smith, Mr. Moss, Mr. Norman, in-deed, the last panel in our 2-day hearing. Many of you, certainly Mr.Livingston and Mr. Gortikov,'have appeared before this committeevery ably in the past, and we're very pleased to say hello to you againand greet you along with your colleagues. Mr. Fitzpatrick is with youthis morning?

Mr. RAILSACK. Mr. Chairman, could I just mention that Mr. Stew-art, I believe, flew all the way from England for this appearance. He'sbeen very, very active and knowledgeable, and I just wanted to mention

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that because Tom Mooney and I had the pleasure of meeting him inEurope.

Mr.. KASTENME1ER. Mr. Steward, you are especially acknowledged,and we look forward to hearing from you. Certainly your group hashad the opportunity to hear all the comments that preceded this par-ticular hour and, in terms of this proceeding will have, so to speak, thelast word.

Mr. Gortikov, we'll call on you, sir.

TESTIMONY OF STANLEY GORTIKOV, RECORDING INDUSTRY AS.SOCIATION OF AMERICA, ACCOMPANIED BY ALAN LIVINGSTON.JERRY MOSS, JOE SMITH, STEPHEN STEWART, GENE NORMAN,AND JAMES FITZPATRICK

Mr. GoRTIKov. Thank you, Mr. Chairman, members of the commit-tee. I'm Stanley Gortikov, president of the Recording Industry Asso-ciation of America whose member companies create and mn.rket about90 percent of the prerecorded tapes and records that are sold in theUnited States.

With me are five industry representatives. Starting on my left, Mr.Jerry Moss, president of A & M Records and chairman of the boardof RIAA; Mr. Joe Smith, chairman of Elektra Asylum Records; Mr.Stephen Stewart, director general of IFPI; Mr. Alan Livingston,president of Entertaiment Group of 20th Century Fox Records; andMr. Gene Norman, president of Crescendo Records; and Mr. JamesFitzpatrick of Arnold & Porter.

We're the cleanup crew. We've been hearing lots of rhetoric hereyesterday-broadcaster protests and disclaimers-and, along the way,we might have lost sight of our focus which is what I hold in my handhere. This is a copyrighted steVnd recording.

[Mr. Gortikov plays the recording for a few moments.]Mr. GOR'rIKOV. That's why ve're here. I don't want to lose sight of

the fact that we're here to support that copyrighted sound recordingand to recognize the uniqueness of that sound recording. What youjust heard was "You Light Up My Life" by Debbie Boone, a hitherto

--iinkown recording artist who was catapulted to stardom by that rec-ord, a talented singer in a unique performance who made a'good tunecome alive, and, to a great measure, the reason for that was traceableto the creative input of the recording company who identified thatunique talent, found the right song, put the two together, provided thecorrect arrangement, brought creative people together, added elec-tronic-engineering, increments that made a hit.

Radio played that tune "You Light Up My Life" many, manythousands of times foe a purpose-to attract audiences, to sell com-mercials, and to make a profit. Radio used that record, and radio stilluses that record for those purposes.

As we remarked this morning, radio does pay composers and pub-lishers. The witness who just finished said $68,000 alone from thatgentleman's stations, and, yes, in this case Debbie Boone isn't going toget anything. The recording company copyright owner isn't going togt anything. The background performers you just heard on the record

i h Af

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aren't going to get anything at all. So radio gained a commercial bene-fit from that air play, but they did not pay for the privilege, and it'sthat inequity and that injustice that brings us before you today.

I'm going to depart from the prepared testimony. I want to talkabout fairness, and I want to talk toughly about fairness, and I'd alsolike to talk about unfairness, our version as well as that of the broad-casters. The unfairness started yesterday when the broadcasters saidthey objected in principle to paying performance royalty, in principle,even though records are the only copyrighted work for which a per-formance royalty is not paid.

Those broadcasters that are given our records said they alreadycompensated us through free air play. Specifically, Mr. Peter Newellwho's president and general manager of Los Angeles station KPOL,said that "by far the most important factor in generating record salesis radio air play." That's what Mr. Newell said, and he's right. Air playis very important to us. We've never denied it, but Mr. Newell saidwhat kind of air play. The records whose sales are most likely bene-fited from air play are records that are probably on these two chartsfrom the most recent issue of Billboard magazine. These are the top100 bcst selling LP's, the top 100 best selling single records.

Two days ago we monitored Mr. Newell's own station on Tuesday.WVe selected 4 of the most listened to hours, and during those 4 hourson KPOL only four records were played that apepar on these bestseller charts. Fifty-three records were played not from those charts.So we can reason that four records that played within those 4 keyhours probably helped sales. Fifty-three records that were played didnot. So Mr. Newell's play list is at odds with his own testimony.

Now. there may be something unfair implicit in the monitoring wedid of Mr. Newell's station, KPOL, because KPOL is kind of a mid-(lIe-of-the-road music station. It's not & rock station, for example;therefore, we also monitored KLOS-FM which is the most influen-tial station in the Los Angeles area, considered by record personnel themost influential station. In the same 4 hours selected on KLOS therewere only 7 Srecords from these top selling charts and 40 recordsnot from the charts. So. sure, air play helps sales, some sales, but cer-tainly not nearly enough to cop out of a performance right. Broad-casters oppose a principle when it is a question of their paying fortheir commercial use of a sound recording. It's I hat simple.

Broadcasters have also told you, and it was refreshing to hear a re-futation of that this morning, that, they cannot afford to pay. Thewitness just before us said they could. And the broadcasters have usedsome ominous statements-they're going to go out of business orthey're going to have to cut back on public service programs-butthe' have omitted the furnishing of any data that would supportthose statements. The only data on the record before you from the in-dependent economic analysis provided by the Copyright Office sug-gests that they are overstating those claims by a long shot. Certainlythey're offering no squawks about paying for any other form of pro-graining which they use-news, sports, dramas, personalities, what-ever.

Little stations like Willie Davis' station, a witness yesterday, cer-tainly deserve some special treatment, and I think that's why the

AI II Al :KJ1T I

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-royalty schedule in the Danielson bill is stratified-no cost for the tinystation, and that would cover about 2 percent of the stations inAmerica. The next level up would only pay about $0.75 per day per-formance royalty under that schedule, and that would embrace about23 percent of the radio stations in America. And the next level upwould pay about $2 a day performance royalty and that would coverabout 33 percent of the stations in America. So, therefore, 33, 56, 58percent of the stations in America would pay $2 a day or less.

There's been a lot of talk yesterday about "fat cats," and the phrasewas used liberally this morning, too--"fat cat record companies," "fat-cat superstars," "fat cat musicians," earning $21,000 a year. Why dothose fat cats need a performance royalty, it was asked. First of all,disabuse yourself of the stereotype that all record companies are fatcats. There are three large record companies, name record companies,in this area right now that are having serious profit problems. An Iknow: I was president of a fat cat record company, and I lost my fatat job because our fat cat artist didn't do so well for 1 year.

[Laughter.]So that fat cat question that was raised here just misses the point

with me. It isn't fat catism at all, and it isn't need. Need is not anissue here. We're talking about equity--equity of being compensatedfor the commercial exploitation of the copyrighted work. Broadcasterscertainly know about equity versus need. Did Alex Haley need tele-vision income even thoughhis television shows helped skyrocket thesales of his book?

And the broadcasters know about equity, too, because they got someof it, last year from you. They gained a performance royalty and a per-formance right when their copyrighted creative programs were to beused by cable TV stations. So how can a broadcaster sit up here andlook you square in the eye, and say that our objectives are unfair? Weask for what they get. and we ask for it precisely the same reasons.

Yesterday several of you, understandably. asked how would theseroyalties be collected and how would they be disbursed, and how wouldall this be done equitably? We're going to work with the unions andhope, to come back to you in the near future with a pro forma pro-posal of the type that Congressinan Danielson described. It may soundcomplicated. We don't believe it is at all. It's being done all over theworld in dozens of nations rigt now. It's being done right here in theUnited States. There's a wealth of experience for this plan. For 40 yearsASCAP mnd BMT have been distributing royalties and collecting themfor composers and publishers. Unions have lists of every vocalist andmusician that appears on every record: so the data is at hand, andASCAP. BM., and SESAC have the information. There are a host ofinternational systems they look to. And they're right now in the processof learning how to distribute income to three other benefciaries--cable,public TV, and the jukes. The course of doing this? It's unknown atthis point. But other countries prove it, can be, done efficiently and eco-nomically. The broadcasters themselves yesterday underscored the costand complexity. If that's true. then let them work with us. too, inevolving a fair and simple system that would be acceptable and liveablefor them.

Yesterday you also heard Mr. Newell of the broadcasters say that,there were no benefits to the nation's economic system in a performance

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right. Absolutely not true. He couldn't be more wrong. There are sig-nificant international ramifications in this bill before you. U.S. per-formers and musicians and recording companies are right today beingdeprived of income from abroad because there is no reciprocal right inthis country. U.S. recordings are heavily air played throughout the-world, and this could and should bring a flow of money right backhere to the United States at a time when we need it, but that is not hap-pening. Fifty-four nations of the world respect the performers' right..We want to be number 55. We want that income flowing back here, too,and the United States needs it.

You've heard some eloquent testimony yesterday from the unionsabout the impact. of technolo.,y, literally in the form of the sound re-cording, and the impact on their members of that technological develop-ment many years ago. and Mr. Railsback acknowledged the techno-logical disniacement, of live musicians by sound recordings. Who knowswhat the future holds for us in terms of technological change, what itholds for us, the record companies and singers and musicians? Tech-noloty in the future mv verve well intrude on our growth and ourrights just as a past technology has displaced musicians. So if radiouses our product for profit. without pawing. who knows what tomor-row may bring. Home copying? Pushbutton music at home? Equip-ment, with memory? Any of those thin," are possible: so we need aperformance ri-ht and a royalty now to protect the record companiesand the recording compnies in the future. Mr. Moss is going to say abit. more about this shortly.

Earlier today when I played "You Light Up Mv Life," you heard'part, of the creative role of the record company in the preparation ofa sound recording. Later today your subcommittee, in an actual record-ing studio. is going to see more of those creative processes come alivethroiiah the actions of record nrodicers and creative staff in intricatefacilities. We know that, creativity is the lifeblood of any record com-pany, and we want to nurture all the forms of music--classics, jazz,contemporary music.

And to help in this realization, the members of the PTA A board haveagreed that their companies would turn over to the National Endow-ment for the Arts ,5 percent of any performance royalties that wouldbe received bv them, and such funds would be earmarked for furthercreative development of both music and recording. Both recordingcompanies and performers. of course. do share a mutually creative rolein making a recording, and it's that shared creative role that underliesthe agreement that previals between RTAA. A.F. of M.. and AFTR.Ato share any 'performance royalty on a 50-50 basis. We've all fostredthat .50-50 sharing as a mandatory provision of any legislation. That15n-50 Qharina was discussed here yesterday, and a question was rnice'1 :Should a record company permit'as much as .0 percent? We certainlystrongly feel that it should, and I'd like to cite the reasons in supportof that rationale.

Record companies are an important creative factor and contributorin the making of a sound recording, and there are just no mavbe'sabout it. And. second. 50-50 sharing is the basic principle of the Romeconvention which is the underlving international document to the per-formance right. And, next. the recording companies' risk is huge, andcongressional history shows that, at last count, about 77 percent of

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sound recordings that are made and released fail to recover their costs.And, next, as I mentioned, because of the threat of future tecmlaology,we need that protection at least equal to other beneficiaries.

We're also talking about copyright law, and, in most instances, therecording company is the owner of the copyright, and often theowner's entitlement is 100 percent. We expect 50 percent, and as owner.of the copyright, a recording company assumes all the responsibilityof costs, of enforcing and protecting the rights granted to sound re-cordings through that copyright. For all those reasons there is nowonder that the parties most affected, that is the vocalists, musicians,

.and ourselves, the parties most affected have agreed over a decade tothe 50-50 sharing, and the parties most affected still so agree.

So, in conclusion, we've come before Congress six times in the past,but this time is different. This time there are four brandnew consid-

.erations which justify your sur" art of a performanc>right.First, Congress has now passed the omnibus copyright law. The per-

formance issue can now be considered on its merits alone.Second, there's now a new royalty tribunal created to which Con-

gress could turn when necessary for the complex, technical task of.adjusting royalty rates.

Third, Congress has granted to broadcasters a performance royaltyfrom cable television. You have set that precedent.

And, fourth, you asked for a thorough, objective study of this issueby the Register of Copyrights. You have it. That comprehensive studystrongly recommends a performance right. It rebuts every broad-caster argument-constitutional, economic, political, even some oftheir smoke screens.

In summary, we ask you to enact a performance right in sound re-cording. Fairness requires it. Precedence requires it. Constitutionalprinciple and judicial interpretation both support it. It's a deservedreward for creative contributions. We need that protection from futuretechnological change. Commonsense compels it because Americancompanies and musicans and singers are losing money from abroad,money they are entitled to.

And, finally, there's no longer any valid reason not to enact a per-formahce right and royalty. The only opposition comes from those whonow gain economic benefit from the absence of a performance right androyalty.

So, to round out my remarks in the prospectus presented, I'd nowlike to call on each of the other executives who are here at the table,and I first, with your permission, would like to call upon Mr. AlanLivingston, president of the Entertainment Group of 20th CenturyFox, and he's our industry's pioneer in the performance right, Mr.Chairman, as you well know.

Mr. KASTENMEIER. Thank you, Mr. Gortikov.Mr. LIviNGSTON. My name is Alan Livingston. I've been in the en-

tertainment business for over 30 years. I've held the positions of presi-dent and chairman of the board of Capitol Records, Inc., vice presi-dent in charge of television programing for the National BroadcastingCo., and have been an independent producer of records and motionpictures. I am currently president of the Entertainment Group of

*20th Century Fox Film Corp. I'd like to point out. that, unlike most of;the testimony, I am probably in the most unbiased position here, per-

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sonally. Neither I nor 20th Century Fox would benefit by a perform-ance right. Our catalog of records for air play is minimal.

On tbn other hand, we own three television stations and are ac-tively seeking additional ones as well as radio stations so that it mightseem, on the surface, that it were to our disadvantage to promote theissue at hand. Nevertheless, speaking-as an individual and with the fullblessing of the management of 20th Century Fox Film Corp., Istrongly support the creation of a performance right in sound record-ings for artists and record manufacturers.

More than 12 years ago, as you know, I made the additional proposalfor a copyright in a recorded performance in the House subcommittee.I'm impressed by the ways of our Government which allow this matterto be still alive, and yet I'm dismayed by the fact that so much timecan be taken by such a simple, and in my opinion, a definitive issue. Aphonograph record is nothing more than a delayed performance. Itwas not created to be performed publicly for profit beyond the controlof the recording artist and the record manufacturer. Those who opposethe performance right in sound recordings are those who now pro-gram their business free of charge.

As to the arguments of those who oppose a performance right, I'dlike to make some brief comments. First, consider the position taken byradio stations that they provide free promotion for sound recordingsthrough air play. The same position might as well be taken that theyprovide free promotion for the underlying copyright.. The songvriter-and music publisher benefit by radio play. And I might point out, incomparing the manufacturer's contribution to the performer. that youmight look at the similar situation between a sonvrwriter and a pub-lisher. A music publisher receives 50 percent of the performer's in--come. Ile makes literally no creative contribute tion. He provides thefinancing for the printing of sheet music, for the promotion of music.

He seeks radio air play as well. And. vet, he justifiably so has takenthat financial risk, and you might compare him, in a smaller sense, to.the record manufacturer who receives the 50 percent. In fact, mostmusic publishers employ record promotion men to encourage as muchair play as possible. They recognize that air play exposes their productto the public, sometimes resulting in sales of records and sheet musicon which they profit. But radio stations have accepted the fact thatthey must pay for the use of this underlying copyright.. Therefore, thepromotion value to the record is no different from the promotion valueto the song itself. And there is no reason whv their arguments shouldbe used against the performer's copyright of a record any more thanit should be used against, the copyright of an original work.In summary, I con find nothing in the broadcasters' claims whichfollows any logic or is in any way in the public interest. Radio doesnot promote the sale of recordings. It merely programs their perform-ance and thus exposes them. People buy what they want, to own whetherthey hear it first on radio, on a jukeb ox, in a discotheque, in a recordstore, or elsewhere. Actually, as we know, only a small percentageof what is programmed by radio is purchased by the conmming public.The point being made here is so simple and obvious that it defies argu-ment: The creative work of performers and producers and the finan-cial risk and investment of manufacturers is being used for profitwithout compensation. Radio stations have profited by this use for-

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many years. It is time this inequity is brought to an end. Thank you.Mr. KASTENtwRp. Thank you, Mr. Livingston.Mr. GORTIKOV. Our next presentation will be by Mr. Gene Norman,

president of Crescendo Records, which is a small jazz and cataloglabel. He is going to address how the specialty record company isimpacted by a performance right.

Mr. NORMAN. Thank you. I'm Gene Norman of Crescendo Records.I'm one of the "skinny cats" in this business. I have a typical smallAmerican business. I have five employees, and I have three nianu-facturer's representatives around the country. We produce about 20albums a year, and we're essentially a catalog company specializing inan important segment of American music and that's jazz. We're tvpi-cal of 100 other small labels in the United States, independent labels.We have chart blockbuster hits. We receive no wide radio exposureor any particular sales benefit, but many radio stations, both AM andFM, do use our production. They use them for production, background,and so on.

I'm reminded of a case several years ago when a leading programsyndicator, a man vLho programs beautiful music, wall to wall tran-quility, for some of the FM stations, called me and said, "I love oneof your records, and I'd like to borrow your master tape in order toget better air quality." And I replied, "Do you announce the record orthe artist or the label?" And he said, "No." I said, "Well, I'm sorry,we're not in business to provide free music for radio stations." So, inleffect, he was using our music, and we would get no benefit from it.Obviously, our records have a limited potential, and recovery of costsis very difficult. It really seems unfair that we should not share inradio profits since we need every income source possible. Our risk isgreat, not only in money, but in creative control, and there is no morelegitimate income source than performance royalties.

As a small company, we give opportunity for many artists whomight not reach a wide audience. We have everything in our cataloguefrom pre-Columbian music-unfortunately, we found out there arenot. too many pre-Columbians to buy the records. We even have a coun-try yodeler on the label. We have a group from Spokane, Wasl.,average age 60. We have a honky-tonk player from Las Vegas. Theseam, all working people who are trying to make a living-and I thinkthey deserve, as well as we deserve, some consideration here-not tomention the fact that we have albums by Louie Armstrong and ArtTatum, some of the jazz greats, and they have widows who need money.And I feel it is only fair that they should share when a radio stationplays for profit. We simply service the appropriate stations knowingthat they will use only what suits their purposes. They play onlywhat's good for them, and, therefore, I believe they should pay forthat privilege.

Curiously, I was a broadcaster myself for 18 years here in Cali-fornia. I was a DJ, and I always really enjoyed the incredible accessI had to all the music in the world, so to speak-Sinatra, Crosby, El-lington, all the, great artists and all the background musicians who per-formed with them-and the station paid no consideration to the recordcompanies who risked so much money to l)roduce all 'the records. Isubmit to you in what other business is'the principal product marketed

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received free, absolutely gratis? It's a curious and inequitable preceident. It's strange, and it occurs in no other country in the world. And,even though I was a leading disc jockey, however immodest that mayseem-I rated No. 4 or better in every national poll-I always under-stood, I always realized that the only reason people listened to me wasbecause of the music I played. They were listening for the records, notfor me.

If I started to play lousy records, they wouldn't listen very long. Iwas active for many years in the concert presentation business hereand also in nightclubs, and every time I presented talent for profit, Ipaid the performers and the people who produced their shows. I askyou: Why shouldn't radio pay for performances the way everybodyelse does who presents talent? There's an old saying that there's nofree lunch. Well, perhaps we should amend that to read: "Except, ofcourse, if you are a broadcaster playing records in the radio." Thankyou.

Mr. KASTNMEIER. Thank you, Mr. Norman.Mr. GORTIKov. Next is Mr. Jerry Moss who's president and founder

of A & "M Records and also chairman of the board of RIAA.Mr. Moss. Good morning. My partner Herb Alpert and myself

started A & M Records in little more than 15 years ago on an invest-mnent of considerably less than $1,000. We consider ourselves part ofthe American dream, and we take pleasure and honor in that accom-modation. Today, we're one of the top five recording companies in theUnited States, and we're, I believe, the largest independent company.The stock in the company is owned by primarily Herb, myself, ouremployees, and our families. Our income is based solely on o ur recordsand the acquisition of music, publishing, and copyrights.

Though I am not a technical man by trade, I would like to addressmy comments and support for what we believe in to the vast amount oftechnology today available that is, quite frankly, scaring me to death,and so I'd like to address myself to the wanton, unrestrained expan-sion of home taping and the encouragement of such home taping bymany broadcasters.

This is another form of personal piracy with millions copying thecommercial recordings with no compensation to the creators, per-formers, or risk takers. If carried to the extreme, our market will beever diminishing. Therefore, we need the protection of legitimate in-come sources such as performance royalties to cushion against suchtechnological onslaught.

New generations of home playback equipment for recordings, discturntables, and cassette decks now have memory components thatallow the listener to select and play any track from various record-ings. Combine this with the home recorder capability, and you seecreated more millions of private, in-home manufacturers using ourcommercial recordings to make compilations of their own choice,again, without income to the creators, performers, and risk takers.Here, too, we need performance royalties to negate some of that in-come loss and to encourage continuing recording.

Premium, super quality tapes are now increasingly available, mak-ing home recording even more tempting than ever. Just down the roadis metallic particle tape which will make possible micromini cassettes

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within a couple of years, all with the capability of being hooked toportable recorders. Picture every teenager in America with a shirt-pocket-sized recorder-player and earphone. Just another reason whyCongress just cannot pass up now the chance to compensate us wherewe deserve such payment.

Also technologically possible is the in-home retrieval via cable ofpushbutton selection of recorded music of the home listener's choicewithout purchasing anything other than the service. Are we to bevictimized by this, too, with no prospects of performers' rights androyalties?

lPerformers and recording companies are even more dramaticallyexploited by the broadcasters' own technology. Many stations arevirtually fully automated. They buy and operate mechanical robotswhich are fed with special cartridges containing tape copies of ourrecordings interspersed with commercials, of course. Those mechani-cal monsters can spew out a straight 24 hours of canned broadcastingwith no human in sight. Commercial time is paid for; the recordedperformances are not. Thank you very much.

Mrl'. KASTFN MEIER. thank you, Mr. Moss.Mr. GORTIKov. Next, Mr. Stephen Stewart, director general of

IFPI which is the International Federation of Producers of Phono-grains and Videograms, has come here from Indon to give 11s someinternational perspective.

Mr. 1CASTEN FIER. You're most welcome, Mr. Stewart. You've comea very long way to give us the benefit of your wisdom and experience.

Mr1'. STEWART. Thank you, Mr. Chairman. May I emphasize thatalthough it is perfectly true, as Stanley Gortikov has said, that I'mthe director general oTIFPI, that I would like to regard myself inthis context, where you are dealing with the legislation of a country,just as a member of a bar and its current chairman who will give youthe picture as he sees it. And, particularly, if you care to ask questionsabout it, I'll answer them as best I can regardless of whether I thinkit serves the interest of those I happen to represent or not.

The main point, on an international level, which was being madewas that 55 countries recognized this right, and this is accurate. ButI think youll get a better picture if I give you the breakdown becauseits the quality as well as the numbers that matter. They fall into threecategories. Europe, category 1; Latin America, on your continent,category 2; and the Asian-Pacific area, category 3.

Now, Europe is the simplest to deal with because in Europe all coun-tries recognize this right, bar four, recognize this right and the fourexceptions are France, Belgium, Holland, and Switzerland, all coun-tries of the French or Latin approach to legislation, and their soledifficulty is that they cannot reconcile the fact that copyright shouldreside in the limited liability company as opposed to a person. In otherwords, they have theoretical difficulties. Nonetheless, I think it signifi-cant for the purpose of this injury that the radio stations in thosecountries do pay for record play under contract, in other words,volume, thereby acknowledging a moral, although not to be a leadingright.

In all other countries, a leading right exists. In Latin America,agaifi.-a majority of the Latin American countries recognize the right,and the number has been increasing rapidly in the last few years.

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In the Asian-Pacific area, the key countries recognize the right. Bythe "key countries," I mean-in the copyrighted music sense-Aus-tralia, New Zealand, Japan, and India.

Having said that and enumerated these three groups, where are theother nearly 100 members of the United Nations? I believe the UnitedNations have over 150 members. They are the Communist world. Notwithout exception, funnily enough, both in Russia and China, theright exists, but it is pretty theoretical because both the record producerand the broadcaster and the users are nationalized enterprises, andtherefore it wouldn't be very significant if one state pocket paid intoanother state pocket.

Numerically, the strongest part of the world which doesn't rec-ognize the right are the developing countries in Africa and Asia, andthere the reason is a very simple one, and that is that they are allimporters of copyrights, and they take the view, and I may think notunreasonably, that it would cost their already poor countries too muchto pay the rich countries for that sort of right, so that the picture isthat the copyright countries, in the sense of the developed countries,users, nearly a 1 recognize this right and that the United States isthe outstanding exception.

The next point I'd like to address myself to, quite briefly, is thenature of the right because it varies considerably, but I think it makesvery little difference. In the Anglo-Saxon context it is the copyright.In many other contexts it's called "neighboring right" and coisistsof a right to equitable remuneration as opposed to the right to allowus to forbid the play. The difference becomes almost nil if with thecopyright goes the compulsory license, as it would under the billhere, but the copyright and the compulsory license is very little differ-ent from the right to equitable remunerat ion and the so-called neigh-boring right-the term was created to placate, particularly, the Latinelement of jurists who, as I told you, saw theoretical objections togiving a copyright to a limited liability company.

The split is an interesting phenomenon, if you look at it. It's thesplit between the record producer and the performer. The producersand the performers, by their international organizations, have agreedsome time ago that the fair and equitable split is 50-50.

And this has been implemented and is being implemented in coun-tries where usually the record producer has the right and the per-former has not because in the majority of countries the right is thatof the record producer because it's in the nature of a copyright. Andin all those countries we advocate the sharing of the proceeds of thisright on a 50-50 basis. It's also interesting to observe that since theRome convention was enacted-that's about 20 years ago-nearly allthe countries which have legislated have given the right to both therecord producer and the performer and, therefore, the 50-50 splitdoes apply. There are a few exceptions, but they are in the natureof perhaps 5 percent of the total-Mexico, mainly in Latin America,and there's Germany in Europe where the right goes to a performerand the record producer then participates under the ruling.

The next point I'd like to shortly cover is the question of collectionand distribution of royalties because it's often been said that what'sthe good of all this ? The bulk of it will go into costs, and the benefits

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to the people who should have the benefits will be small. This, inter-nationally, has not proved correct. And the reason for it is that, par-ticularly, air play must be logged now in any event because of thecopyright royalty to an author, and the automated processes aresuch that the additional logging for the performer and the recordproducer causes no additional problem. Therefore, if you look atthe cost of the societies which have been set up to collect and dis-tribute the royalties, you'll find that those who deal with nationalcollection and distribution run at about 5 percent which is low inthe league of all those societies, and those who deal with it inter-nationally run between 10 and 15 percent which is also on the lowside compared with the costs of all those societies.

I'm reminded that my time is running out. May I leave you withtwo points which puzzle me because they don't seem to respond toordinary logic or commercial reasoning. The first one is the positionof the broadcasters, because it seems to me that their position vis-a-vis the cable producer is exactly the same as has already been said.They use the broadcasters' product without permission and makemoney out of it and don't want to pay. The position here is exactlythe same. The broadcaster uses the product of the record producerand the artist without permission and is making money from it.And the point I'd like to make here is that it is extraordinary thatthis opposition is strongly voiced in the United States where all theradio stations are commercial enterprises; whereas, it isn't voicedhalf as strongly in other parts of the world where the broadcasters'public operations are not profitmaking. That puzzles me.

Now, the other point that puzzles me is that of the relationshipof the United States with the rest of the world, economically, and interms of balance of payments. Now, the United States of America-we're talking mainly about musical copyrights-is, I think one cansay without any possibility of contradiction, the largest exporter ofcopyrights. The second one is the United Kingdom. And what puz-zles me is that here is a source of income for the United States, forU.S. producers of records, and performers, which goes for a lossbecause foreigners obviously don't pay U.S. reciprocity. In the ob-verse position, the. United States doesn't pay for record play abroad,and record play abroad is, in the Western World at any rate, between athird and a half U.S. copyrights.

Mr. RAILSBACK. May I ask, does anybody have any idea how muchmoney that would be in record sales abroad

Mr. STEWART. In the record sales-Mfr. GoRTiKov. An estimate is that, of world sales, U.S. sales are

about half.Mr. RAn.SBACK. Do we have any sales figure, rough figure?Mr.-GoRTIKov. I don't have them here. I could get them for you.Mr. STEWART. But the point I was trying to make is that half the

air play in some countries is U.S. copyrights. I'll stop here if youwvant me to answer any questions of yours, either-in writing by wayof homework, or orally. It would be an honor. _

Mr. KASTNMIFR Your comments have been very helpful, Mr.Stewart. I think the second of the two puzzles, as you suggest, is, infact, perhaps an inconsistency in terms of economic benefit. However,

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the other one-we often find our organizations on the side of an issuethat economically benefits, even the Record Industry of America willoppose author-composers in terms of increases in mechanical royal-ties, when it suits them, very vigorously. So that is not so much of apuzzle to us.

M'. STEWART. Increase, yes, but existence of the right, no.Mr. KASTEN.ME' I.R. I'm sure that there was a time when that was a

question.Mr. GORTIKOV. 'Mr. Chairman, our last presentant is 3r. Joseph

Smith, chairman of Elektra Asylum Records.Mr. S~mrir. I'm the end man here; so you'll pardon in that we did

not compare any notes. There might be some brief repetition. I hopethe presentation will be brief, as well. 3y background is 12 years inthe broadcasting industry and 16 years in the record industry as chair-man of Elektra Asylum Records which gives me a rather uniqueperspective in this matter. I think you've heard both our industries,broadcast and music, take our best shots. We have told you that wehave provided all this free, 16, 18 hours a day of programing to thebroadcasting world, and they have told you how they have increasedour sales by giving exposure to our artists. There is validity to bothpoints.

However, it seems to me, for this interdependent, relationship, theentire financial burden and the control has shifted one way over the)ast 15 years. The costs involved for record companies to develop

new talent, to promote, to market, to provide 7,000 copies of each newalbum to so many radio stations. hasigronene way wh ie radio stationsstill, as you've heard, have kept the options of j)icking and choosingfrom those records, have become automated, have not identifiedrecords in many cases, have contributed too little in terms of creativ-ity to our industry. In fact, the stations' cumulative effect in the past15 years has restricted exposure, has denied us the opportunity topresent new talent in so many cases. and has developed a philosophyof looking for winners only in radio stations, and we have had toturn to other means to market our records and find exposure.

We have invested millions of dollars in clubs subsidizing personalappearance stores by artists in and concert halls. We have spenthundreds of inillions of dollars in radio, press, and television adver-tising. On the same radio stations where we find difficult in exposingour talent, we have bought the time. We are still dependent to thegreatest degree on radio, but we are also aware we are at the raercyof radio station options which are theirs to change formats to allnews, to two-way talk radio and the first is, gentlemen, that if thebroadcasting world felt that. the sound of ice water dropping on alinoleum floor were the way to attract listeners, then our records woul(lbe sent back to us and ice water dropping on a linolemn floor wouldbe the prevalent sound in music.

Mr. Newell of KPOL has mentioned that if the advertisers pay,and we paid-he has equated the advertising costs for Coca-Cola andall other clients on his radio station with the fact that we shouldhe paying. It's a specious argument. You could not present 1 week ofbroadcasting in a rating period of all advertising. The )roduct thatwe have provided is the attraction for his advertisers. We have en-

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couraged where the music goes. We have developed the new talent.To hear jukebox people and broadcasting people claim that we haveno creative input is an insult to us. We have made the decisions toselect the talent. We have found the new Linda Ronstadts and thenew Paul McCartneys and the new Captains and Tennilles. We haveprovided the producers, the arrangers, the studios, and the tech-nology, and the marketing. We make an enormous input. Radio is notinvolved in that process. Radio picks and chooses at the end of theline. We are not allowed to tell radio stations that a new Linda Ron-stadt record is to be played.

In addition to playing our records, we are asked for artists for ap-pearances for radio stations. We are asked for radio spots. We areasked for hundred of thousands of free records for radio station give-aways and promotions. The fact is that if we are partners, we havevery little input, and we are-bearing the financial cost, and as you'veheard, we have no license to steal.

This is not an industry that guarantees success out of the box. The,financial records of some record companies would be startling. ABCRecords lost $22 million last year. This is a crap game mentalitywhere we risk a great deal. The radio industry is on a free ride withour music, and we know that if they stopped playing our records,we would suffer. We would lose our main source of exposure, and,on the other hand, we know and they know that they would findgreat difficulty in providing 18 hours a day of broadcasting. We doprovide 150 LP's a week and more singles; so we are at risk all thetime, and we have no interest in damaging the financial health ofthe broadcasting industry.

There is, however, an inequity, and I don't think the broadcastersare addressing themselves to that inequity. Their main defense seemsto revolve around the thesis that if it has not existed, it should notexist now. That is not logical reasoning.

Mr. KASTENMEIER. Thank you. Mr. Smith.Mr. Gonwcxov. Thank you, Mr. Chairman.Mr. KASTENMEER. That concludes the panel's presentation. M1r.

Gortikov, I noticed that you, in the panel, did not really mentionjukeboxes, and I think that you really, all of you, talked about radioin terms of a target as far as how your productions are used. Does thatmean that you're relatively disinterested in the jukebox part of itas to whether or not it's covered or whether it be a major source ofincome for the industry performers?

Mr. Go'rtKov. No. We are not disinterested at all. I (lid not mentionjukes, nor the many other users of icorded music. We seek the rightind the royalty from all. The one difference from that would be. totake some exception to the proposal. another legislative l)oposal of theCopyright Office which calls for a sharing with us of the income of thojukebox royalty to be enjoyed by the music composers and publishers.It is not our objective at all to reduce any income of composers orpublishers . They should not pay the price for any benefits that could be

gained by us.M r. KASTENMF.IER. I'm sorrV Mr. Danielson isn't here today. but

obl ,ouslv the history of the 1)roix)sal is a long one. Do you have any1Balticular knowledge as to, 1!d sai, the recent history of the develop-

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ment of this proposal which ends tip in sharing sections 111 and 116,tle cable TV industry and jukebox, with the performing rights so-cieties, with the author-composers? Do you happen to know how thathappened?

Mr. FiwzPATRICK. The first bill that was introduced that reflectsthe performance right was introduced by Senator Pete Williams in1967. At that time there was a separate payment of a dollar on top ofthe $8 that was to come to the recording industry and the performers.At various times during the next 6 or 7 years as the bill moved throughthe Senate, as I recall, the bill that was reported out by the Senatesubcommittee excluded any royalty payments at all for jukeboxes.This is my recollection. I would be glad to supply this in writing forthe record.

At a later time, we understood the Danielson bill to exclude anypayment from jukeboxes to us on a performance royalty. The lan-guage of the Danielson bill is not a triumph of clarity in that connec-tion. There is some muddiness in the language, Stan says. WIe certainlysupport the conclusions of the Copyright Office that jukebox and cableshould pay, but we object to the Copyright Office formula that we doget one of the $8 of the authors and composers and think that an addi-tional payment from jukeboxes would be appropriate and justified.

Mr. KAST',wiirIr. Thank you for that clarification. I must confess,many years ago when I was young and bought records and listened torecords on the air, I assumed that broadcasters bought a differentrecord than we did from the record store that probably had a differentlabel and they probably paid more for it. I don't know. Perhaps thatwas never true. I don't know where I got that notion.

MNr. NORMAN. That was true for many years. In the early days ofra(lio, because there weren't that many records produced that weresuitable for air play, there were transcription companies. There wasone out here called' Standard, and they would make special 16-inchbroadcast transcriptions, and those were generally not available be-cause there was not the vast choice that there is today. And all thosecompanies have gone out of business long ago because of so many.records that were provided free. They used to have to pay for thatmusic. That's a very cogent point. They used to pay for music madeespecially for broadcast.

Mr. KASTE,MFIvR. At one time, in terms of controlling the situation,the change was suggested that you could produce-whether this wasfor, let's say, ASCAP in terms of the jukebox industry-a separatelabel which would go for commercial purposes, a commercial pur-pose label. That record would sell for-more. Now. your industry re-sisted, I-think, in your own terms, wisely, the getting so involved forthat purpose. Certainly, it wouldn't have done the recording industryany good to be a collector in part. for, let's say, the performing rightssocieties. But the notion was at least presented. That might be a sup-portive differential that a station could nnt, in fact, play a record thatdidn't have, let's say, a black label, wasn't, in fact. a commercial labeland would cost perhaps a dollar a side more or a dollar a record moreor some other such figure. However, I just throw that out for historicalpurposes.

As I indicated, I think, to Mr. Fitzpatrick privately, I rememberan earlier proposal which called for a performer's right in sound

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recordings, but did not provide for that to be shared by recordingcompanies. And, in fact, my recollection is it went back to'about 1965.Recording companies naturally resisted that particular proposal. Atsome point subsequent-in time, those who represented performers andyourselves, apparently, resolved this difference. I was wonderingwhether you could enlighten me on that.

Mr. FITZPATRICK. My recollection, Mr. Kastenmeier, is as follows:In the 1965 hearings that you chaired, at that time the unions appearedbefore your subcommittee and strongly urged the performance right.At that time the Record Industry Association also appeaid. Mr. Liv-ington, on behalf of Oapitol, vigorously advanced a performanceright proposal. At that time the RIAA f main concern was with thesize of the mechanical rate increase, and the focus of the presentationof RIAA was directly on the question of what the size of the mechani-cal rate was going to'be.

The proposal that had come forward from the Copyright Office wasa 3-cent rate, and publishers were urging much higher rates, and thatissue was not resolved until your subcommittee had come down on the21% -cent rate. That was in early 1966. In 1967, for the first time aftera face-off of almost 30 years between the recording industry and theunions, there was an accord reached between Jerry Adler and HermanKLenin, who were the leaders of the musician 's union at that time, andErnie Meyers, who was then the executive director of the RIAA, andmyself, which reflected an accord and, for the first time a combinedeffort to secure a performance right. It was soon thereafter that Sena-tor Williams had introduced the first bill that had captured the per-formance rights proposal, and it is my recollection that the first for-mal amendment that had come into the legislative process was Sena-tor Williams' amendment, and that amendment did, in fact, reflectjoint sharing of the 50-50 proposal. I think the earlier proposal wassimply testimony to your committee in 1965, but I could be wrong onthat.

Mr. KASTENMmER. Thank you. That was very helpful for the rec-ord because, among otter things, the proposal has been around a longwhile, but not altogether that long in terms of the history of at leastthe present proposal.

I'm wondering, Mr. Norman, given the smaller specialty houserecording company, to what extent you would hope to benefit? Iwould think very marginally.

Mr. NORMAN. Well, not at all. Let me give you a good example of myproblem. There's a television station-although dealing principallywith radio, this is a good example. There's a television station in SanFrancisco that has a science fiction horror movie show every night,and every night they play one of my records as a theme song. Now,they don't mention what the record is. I have seen no sales result of theair play because they don't mention what it is. In other words, they'reusing an album of mine which cost a great deal of money to produce,and they're not compensating me for it in any way. Now, could youconceive that they would not agree to pay the producer of the filmsthey show? So I'm providing music for them, and they don't com-pensate me in any way for it, and that happens frequently, you see.

Mr. KASTENMEIER. They compensate the author-composer?

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M'. NORM AN. Yes, they do, and they should. But they should alsocompensate my company for having invested those thousands ofdollars and taking people into the studio and also the performer whohad to cmnceive the arrangements, and so on. That is a good example,I think, of our view of if.

Mr. KASTENMEIER. Mr. Moss, I was interested in the specter youcreated with respect to home recording, the potential of electronicreproductions which are not susceptible to any remuneration what-soever.But it seemed to me that almost everybody would be theoret-ically adversely affected. I mean I'm talkiiig about radio as well,because somebody could record 3 hours and put it on tape, and theydon't need to listen to the radio, at least for that period anymore.

The Betamax, of course, apparently threatens the movie industry,and almost every collection of artists or any industry use of music orcreative works are, in a sense, threatened by that as a sort of replace-ment. But I'm saying that you're really not in a very much differentposition than anybody else in that regard. It's not easily susceptible toremedy, as we know. If a 12-year-old produces on tape a record at formeand does nothing more with it, there's not very much that can be doneabout that. But I guess I'm also saying I don't. really see this bill as aremedy for that type of situation since many industries are similarlyaffected or adversely affected by the same uses.

Mr. Moss. I think, Mr. Chairman, what I was referring to in partic-ular in that case was the idea of the so-called "fat cat" record companywhere all they seem to be living on is a heap of income coming in fromall sources. I was trying to explain that, through these technologicaladvances that we are beina hit on from a lot of different sides as well as

from the technology affecting broadcasting which affects us as well.Mr. S.MITT. Mr. Kastenmeierif I might, I can't equafe the use of

Betamax. We have a commodity that the greatest enjoyment is playingit many times. If you were to take "All In The Fanily," you wouldwatch "All In The Family." but it is unlikely that you would con-sistently play "All In The Family." You would erase progTams andsee it at a more convenient time. What I'm saying is to equate thereproduction of copyrighted materials is different because the radiostation is constantly playing-there will be a new play list next weekthat they'll record, and that will stay in the box, and nobody will haveto buy that record that they can play at their parties or for theirown enjoyment.

And the effects are far more damaging for us than for televisionproducers whose shows rc aired and paid for and rated and generallyseen once and then erased and another show taped, where ours are storedaway and played over and over anain.

Mr. KASTN.NrMErE. Thank you. Mr. Smith.One other thing. I notice several members of the panel tend to equate

the benefits to broadcasters as a result. of the copyright revision legis-lation with respect to cable and this particular proposal, but, ac-tually, the radio broadcasters are really scarcely benefited bv thecable provision. It was largely designed to benefit not even' tele-vision because, really. it is the proprietors of the programing, veryoften moviemaker, that are the principal parties. and sometimes tele-vision, but rarely the radio broadcaster who isn't really a competitor

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of cable in any event. And so I'm not sure that that is a proper analogyin terms of quid pro quo. Did you want to comment, Mr. Gortikov?

Mr. Goa'rIKov. Only to the extent there is strong ownership cross-over between radio and television. It's the same people talking out ofdifferent sides of their mouths, and the basic principle is the sameof a creative copyrighted work. And I think that's where we draw theparallel, but you'recertainly right in observing the difference of theuse of television versus radio. he. parallel is Very weak in that sense,but not in the description of the basic copyrighted work.

Mr. KASTENMEIER. Thank you, Mr. Gortikov.Mr. Stewart, I wish we had more time so that we might compara-

tively look at other systems and a model, potentially, for the UnitedStates. When you spoke of any distinguishing characteristics amongthe different types of arrangements or recognition of rights variousnations have accorded, one of the differences in a very superficialreview suggests that we have a rank of neighboring rights, somethingless tian actual copyright, that the term is also reduced, for example,I think Denmark, the German Federal Republic, in terms of 25 years.Do you think the term is important. here in terms of whether it's 25vear- or the full copyright term? In Great Britain, is it an actualcopy ight term? I actually don't know.

.!r. STEWARr. You're quite right. Mr. Chairman. In the Anglo-Saxon countries-Britain, Australia, et cetera-the term is the same ascopyright because it is a copyright. In the continental European coun-tries, it is very often a shorter term-20, 25, 30 years. Until quite re-cently it didn't matter very much, but now that we are in the late seven-ties and the recordings of the late forties, shall we say. 30 years or 25,become free, broadcasters will try and save money by playing freerecords as opposed to the payable ones. That's the reason why, in thosecountries, particularly the performers. seek a longer term because theysay that our old records when we were in our prime now compete withour records which we want to sell now. hut perhaps we are not anymore in our prime. This goes particularly for classical performers, asoprano.

Mr. KASTENMITER. I speculated yesterday to a point you made earlierthat. in terms of this country, as far as popular music is concerned, wecould expect that perhaps a very high percentage. 98 or 99 percent,would be essentially domestic as far as reproduction, the operation ofthis country. But as far as classical music, great. symphonies and theclassical singers, the opera singers, that perhaps that would be more orless a 50-50 proposition in terms of the United States.- I just throwthat out, as an observation of its impact in terms of. as you observed,the mutuality that would occur in terms of. our adoptintr a right some-what similar to many of the European countries, perhaps to GreatBritain, that would be of economic benefit to us concerning the popularfield, but not so much in the classical field. Would you not agree?

Mr. STEWART. I find it difficult to answer, Mr. Chairman. The firstthing I think one ought to say is that record play on radio stations, ifyou look at it all round the world, is very largely populai', I should saytwo-thirds or more. In some countries, 90 percent is popular music. andthis is, of course. where the American strength lies. In the classical rec-ord field, I would have thought that there is a more equitable distribu-

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tion. It all depends what your law says because some laws, for instance,say that what matters is where a recording took place, the fixed issue,and some say it's the nationality of the company. Now, if it's the na-tionality of the company, American recording would do rather well be-cause some of the big classical recording companies are American. Ifit's a fixation, it might be more evenly distributed between Europe,where the recording often takes place-places like Vienna or Paris orLondon-and the United States. But I still think it would be more like60-40,50-50.

Mr. GORTuKov. Your observation is right in that there is more classi-cal recording going on in Europe, for example, than there is in theUnited States. And, therefore, your conclusion is basically accurate.However, where a licensor, say a European licensor of a classical labelsublicenses an American company as a sublicensee of copyright, ifthere were air play within the'United States, it would probably, as itdoes with musical composition copyrights, the performance royaltiesfrom the U.S. air play would flow to the U.S. sublicensee, and then ashare of that would flow back to the original European licensor, andthe reverse would be true of an American-originated work that is li-censed to play overseas, be it classical or pop.

Mr. KASTrMxmErm Yes, I appreciate that observation. It's helpful.There's one last question. Mr. Stewart, among performers in Europeansystems, what is the customary division? Do you have, for example, asymphony of 100 musicians and a conductor, 101 persons. do they shareequally in 101 pieces, or does it go into a trust fund? Is there any dispo-sition to prescribe a division among artists or among performers inEuropean systems?

Mr. STEWART. It varies greatly, Mr. Chairman. And the answer toyour question is very largely philosophical. In the countries wherethey wish to benefit the underdog, that's the ordinary musician, theywould tilt it heavily in favor of the musician. There are various waysof doing it.

Mr. RAILSBACK. May I just interrupt, Mr. Chairman, to say thatthere's one country that if an entertainer makes too much, they don'tpermit him to have anything. Isn't that right ?

Mr. STEWART. Quite right, Congressman Railsback. That's Ger-many. If you make more than, I think, it's in the nature of $20,000,you don't qualify; so the super p01) stars get nothing, and, be it said

in their honor, are quite content. They suggested it, that the benefitshould be to the small giv. So. really, the answer to your question ishow heavily it's tilted in'favor of the furtherance of the underdog.the ordinary musician, depends on the moral and political philosophyof a country in which the legislation is enacted.

Mr. K.xs'rEN-MEriR.n Well. I don't know that a political decision wouldbe a very wise decision since there are many more violinists than thereare conductors. But that may not be a question we have to face. I yieldto the gentleman from Illinois.

fr. RATIhSBACK. Thank you, Mr. Chairman. May I ask some ques-tions which I'm sure ark going-to be very basic to you, and I thinkyou're going to have to do y our very best at giving short answers, butI'm kind of curious how the whole system operates. in other words,your record company. Somebody comes in peddling a song. Say thatyou take a look at that song, and you like it. What do you do? What

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kind of agreements do you enter into with the composer, and whatdoes he get, and so forth?

Mr. Moss. Quite frankly, every situation is different.Mr. RAILSBACK. That's what-I was afraid of.Mr. Moss. But in every situation the record company plays a crea-

tive role. I mean that is a fact.Mr. RAILSaACK. Yes, but be more specific.Give us some examples.Mr. Moss. A local band, let's say, is playing at a local club in a

market. It doesn't only have to be Los Angeles. There could b, a bandjust knocking them out in Pittsburgh, for example. The record com-panies from Los Angeles or from New York or even from GreatBritain might hear about this band through their different networksof talent scouts, so to speak, and fly representatives to this place inPittsburgh to hear this band. A certain kind of bidding or attractionfor this particular group of artists would take place, and they wouldstrike a deal with the band's representatives.

Mr. RAILSBACK. All right. Can you give us some examplesMr. Moss. Some examples might'be that they would form a royalty,

accept a royalty of, let's say, 10 percent-of the retail price of the rec-ords that they sold.

Mr. RAILSBACK. That's what I'm interested in. Any front money atall?

Mr. Moss. There would be front money which would be negotiable.I would say probably any signing that takes place today takes placewith front money to the artist. Then there would be plans made be-tween therecord company and the artist about who would produce ordirect the actual recording or where the recording would take place.

Mr. RAILSBACK. Is there an actual assignment of copyright at all?Mr. Moss. That would be another conversation between the potential

publisher and the potential songwriters. If this band created all theirown material, then obviously different publishers who might be asso-ciated with the record companies would be interested in those songs.

Mfr. RAILSBACK. What would be the usual split there?Mr. Moss. In some cases, or in most cases you might say that the

publisher might give an advance of 50 percent of the copyright.Mr. RAILSBACK. Is that, again, front money?Mr. Moss. Yes, front money for the artist.Mr. RAILSBACK. And then a percentage, usually, of record sales?Mr. Moss. Well, in the case of the copyright and the publishing area,

it's generally quite clear. There's a mechanical royalty which is clearlydefined. Then there's a sheet music royalty which is negotiated.

Mf r. RAILSBACK. So there's a division, then, an agreement reachedfor division of those payments?

Ir. Moss. Yes.MIr. RAILSBACK. What is the usual division? I'm just curious.Mr. Moss. You mean as far as the song?Mr. RAITABACK. Yes.Mr. Moss. An advance might be given on the basis, as T said before,

of ownership of half the copyright of the song, the publishing half.The writer's half is also his half. In other words, very rarely does thewriter sell the writer's share of his half. That's done by some estatesafter perhaps a writer passes away. Generally the songwriter who con-

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trols the copyright-until he -places it in the hands of a l)ublisher-owns 100 percent of that.

Mr. RALSBACK. IS it quite typical that the record companies do havea publishing division?

Mr. Moss. Yes.Mr. RATLSBACK. All right.Mr. Moss. But there are other independent publishing firms as well.Mr. RATRSBACK. Yes.Mr. Moss. And we compete with those firms.Mr. RAILBACK. N.ow let me ask you this. You have, the radio broad-

casters paying into the B"M or the SESAC or ASCAP. Where dothose payments go now? That big pool? Would that go back to thecopyriglht holder? Do the record companies get anything out of that ?

Mir. Moss. No. Only the record companies that own publishingcompanies. in a sefise.

Mr. RAirSBACK. But if they own a publishing company, then theydo-

Mr. Moss. They do get a share of the BMI or A C.kP or SESACpayments. yes.

Mr. R.uLsBA.wK. Is there any kind of a breakdown on the revenuesderived by record companies by reason of their publishing divisions?I'm just curiou.s.

Mfr. Mtoss. It's difficult to ascertain.Mfr. RAILsBACK. I'll ask Stan Gortikov.Mr. GORTIKOV. I can't give you any accurate figures. but the relative

iml)ortance of a record company, publishin, company, varies all overthe lot. For example, the Warner complex has a very important pub-lishing complex under its corporate umbrella. CBS.' being the secondlargest company, its publishing interests are rather modest.

Mr. RATUSB.WCK. Yes, I understand. It varies.Mir. }ORTT-ov. It varies completely from large to small companies.Mr. RAsBACK. It's significant, but at least some record companies

that have their own publishing divisions do derive payments by reasonof nubl ie performances by broadcasters?

Mr. GORTIKov. T think that's wrongly characterized. It's accurate.Mr. RAiLsBACK. I'm not making a big deal of it.Mr. GoTrMKov. The record company isn't doing it; it's the pul)lisling

co7m)anv that's doing it.Mr. R.ATwsnAcm. What percentage losses, if vou have any ideas or

ballpark figures or any of the results of any studies. how man recordfail to recapture the investments that went into producing the records ?Whit iPercentage losses?

M 1'. GORTIKov. The last figures that we lad accumullaterTshowed thatof popular albums. 77 percent of popular albums released failed to re-cover their costs.

Mr. RAILRB.WK. Wien yon talk about costs, tliat's production costs,promotional costs?

Mr. GORTIKOV. Yes: they're investment. Eighty percent of singlerecords failed to recover their costs; 95 percent 'of classical recordsfailed to recover their costs.

Mr. RATUsBACK. This is kind of different from the situation von weredespribinrv. When you hire an orchestra or a band. how are the inusi-cians paid?

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Mr. SMITH. Tjn !ranger and producer will mutually agree as to theinstrumentation. .ey will then hire a contractor through the Ameri-can Federation of Musicians who will book musicians. 'We will thenpay them union scale. We will engage a studio, and they are paidregardless of whether the record recovers or not.

Mr. RAIMSBACK. That's the point. So that, in the production of rec-ords, the musicians, the backup musicians, I would think particularly,they don't have the risk involved?

Mr. SMIr. They don't have the down side.Mr. A1% I .ACK. T Ihey are paid ?Mr. SMIT[. They don't have tile down side. At this point they don't

have the up side either.Mr. RAf LsIC.K. So the rationale for including record companies in

the payment of performers' royalties is the fact that they are a part ofthe creation and, furthermore, they've, in many cases, taken great riskso that it's only fair to recognize their input

Mr. SMITH. In all cases we've taken the risk, Congres-man Railsback.Obviously it's not a risk to record Paul Mc('artney at this point. But atolne point in his career he was a risk.

Mr. RAILSBACK. Yes.Mr. SMI I And we (10 l)a) musicians whether or not we're getting

our money back. We're part of tie creative l)r(ess in the financial endas well as the creative end of engaging producers and so forth.

Mr. R]AIJRr.\'K. NOW, let due address some tqe,,tions to M'r. Stewart.Mr. Stewart, how many countries pay only t lie po'former tie royalty

ii not tit( r('or( col 1)a1ies. if you know .Mr. S'T'WAtrr. The only one 1 can think of straightaway is Mlexico.Mr. R.%IisB.kcK. And they pay only performers and not the record

companies?Mr. STiz irr. I lon't think there are any others, but I'd like to think

about it.M'. lI.ii 'u. NoW. your one point, that the reson lhy that is or

(ne of the reasons why that is is that the record companies actually en-joy the status of heirng the copyright owner in some of the countrieswhich means that legally they're entitled to all of the royalties in someof those Countries. lnt were you sayingThat they gratuiitously antIvoluntarily share some of that 'with performers even in those count rieswhere the 1)erforniei-s have no legal rights?

Mr. STWART. That's so, Congressman Rail,.baek, just so. In 19.',4the record producers internationally made the agreement with the Mfu-sicians Union. also internationally, tile National Federation of Musi-cians, that just that, what you Just said. would take place. If the recordproducer's laid a royalty and the artist is not, the record producerwould take what was then a voluntary payment under contract to tile)erformer.

Mr. RAI.sR.-K. May I just kind of recognize that in this country Ithink it's kind of ironic. We. in my opinion, have seen, I think, fairlyserious legal questions raised as to whether-well, even in the case ofmusicians, whether their creativity-it could be argued that they arereally not, under the constitution, an author and so forth-whetherthey should be entitled to a royalty. That argument is. in my opinion.even more persuasive when you deal with the record coml)anies ratherthan the musicians. And so what we have to do is try to determine

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whether the record companies fall into the category of people thatshould be entitled to some kind of creative protection, and your testi-mony addressed itself to that. You'de saying that you are creative.

Mr. Strrii. If Frank Sinatra were to sing "Strangers in the Night,"he is not an author; he owns no copyright. However, his performanceis one of a kind, and he is entitled, he has a right in that record. He hasa right in that record. We have provided another input. But if youwere to proceed logically the way you were talking that the musicianis not the author and deserves nothing, then-

Mr. RAILSBACK. No, I'm saying that argument has been raised, and.in my opinion, it's much easier to say that a musician is entitled toprotection because of that musician's talent and creativity.

Mr. SMITH. And we're trying to take it a generation further. Wehave made decisions initially in bringing those people into recordingstudios. We have worked in the process of selecting songs and ar-rangers and producers.

Mr. KASTN1EI tER. I wanted to follow up on that because, in fact, Iwondered whether we are dealing with fiction that the process has to beaffected with creativeness, and I would ask Mfr. Norman, for example,if he took a live jazz performance. put it on a record without change,what creativity does he attribute to himself?

Mr. NORA.NrA.. Yes. The creativity is plain and simple. I have to de-cide what is worth preserving, what is worth releasing. It's a matterof editing the performance; it's a matter of knowing what representsthe artist's best performance. Over a period of 15 years, I )resentedhundreds of jazz concerts, but only a few were worthy of being re-leased. That was my decision, and I also had to pay the musicians andguarantee them a rovalty. And we also have to get involved in thegraphics. No one has mentioned that today, designing album coversthat will appeal to people.

Mr. KAsr F.METIEN.R. But that's a separate issue.Mr. RAL8BACK. It may be copyrightable.Mr. NORMAN. We're not asking for royalties on that. In any case.

I'm the custodian of that man's talent. I have to be creative e*noulghas an editor to know what should be released so as to preserve hisreputation.

Mr. KIsATENTN!F.I.R. Anymore so than his business agents?Mr. NoR~r.N. Absolutely. For example, I've just been invited to

release a jazz line of 200 albums for a company called Pickwick whichhas access to masters of other companies who are ro longer being re-leased. They're relving on me to pick selections of graphic for 200albums. That's a highly developed skill, and very few people have it.

Mr. FIrZPATmICK. You characterize the question as a serious one.From a legal point of view. of all of the difficult questions that com-mittee has to deal with, this, I respectfully suggest, is not a seriousproblem. And, if it is, the courts are there to resolve it. The CopyrightOffice argues that sound recordings are not writings, and the perform-ers and record producers are not authors. The courts have consistentlyupheld the constitutional eligibility of sound recordings under theprotection of the coRyright law. and we know something about. that.

.f r. RATISBACK. Mav I interrupt you, though ?Mr. FITZPATRICK. Yes.

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Mr. RAILSBACK. There are some decisions in the Waring cases. I'mfamiliar with the lVaring cases, and they would recognize that thereshould be protection to performers like the Fred Waring orchestra. Iam unaware of any legal determination that said record companiesare in the same category.

Mr. FITZPATRICK. Let me tell you of one because we took that casebefore a three-judge Federal court after the Congress gave us, thesound recording industry, a copyright in 1972. There was a challengeraised that a sound recording was not the writing of an author, andthis went to a three-judge court because it was a constituional issueraised. And the court there held, quite squarely, that this was the writ-ing of an author and that Congtwss had the, authority to grant copy-right protection to the record company for that riglt, and they sald"sound recording firm."

Mr. RAILSBACK. Is that record piracy?Mr. FITZPATRICK. Yes. But the question is: You have one disc, and

it is the disc-Mr. RAILSBACK. That is copyright protection. That is a copyright

status. But I still think there might be a difference under Americanlaw in copyright status and performers' royalties.

Mr. FiZrATmRC. I would suggest this-Mr. RAILSBACK. Even in Europe they're different.Mr. FITZP.,ThCK. Under section 106 of the. revision law, a copy-

right product is given a series of rights. There is a right not to haveit duplicated; there is a right not to have it displayed : there is a rightnot to have it performed. That. is the. way section 106 is set up in thepresent law: A copyright item has all that bundle of rights. The wayCongress wrote section 114 was to exclude the performance section.Now, the Copyright Office has made quit(v clear. afni we think this isquite clearly the law, that there is not a separate issue in terms of writ-ings of an author, as it relates to the two different rights that accrueto a copyright owner. That is the right not to have somebody copyit and the right not to have somebody perform it without paying.

Mr. RAILSBACK. I respectfully disagree. I think that you can make anargument, yes, we're expanding the protection of the copyright law.I think you can make that argument. But I think there's a little bitof difference in dealing with the problem of performers' royalties.

Mr. GORTIKOV. I'm a nonlawyer: so I'm reading in the Register ofCopyrights' report. She faces this issue squarely and raises the ques-tion: Can sound recordings be the writings of an author for purposesof protection against unauthorized duplication? This is piracy orcounterfeiting, but not for purposes of protection against unauthor-ized public performance. And the conclusion she reaches is "No."And her rationale is either a work is the writing of an author, orit is not. If it is. the Constitution empowers Congress to grant anyprotection that is considered justified. There is no basis in logic orprecedent for suggesting that a work is writing for some purposes_and not for others.

"fr. RAILSBACK. I know Barbara Ringer's position, but what Imentioned was, without really trying to resolve it, I said there areserious arguments the other 'way, and there are. Broadcasting has

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raised some serious arguments-I think NBC, in their rebuttal-soI'm not so sure it's as clear cut as you would like us to believe.

M r. FITZPATRICK. That, Congressman Railsbacz, is one case wewould take on a contingent fee, to the constitutional issue.

Mr. KLASTENMEIER. I happen to have the same apprehension. I guessI'm asking a larger question. I think the present copyright law andrevision certainly contemplates inclusion for protection of a largenumber of activities that are not essential, that we have long sincepassed that point, and they're dealing with a fiction as to whetherit's the right of an author or creator in that sense. And I'm not surewhether there's any really practical distinction between ordinary coin.mercial communications in any form and something that is essentiallyconstitutionally created as the writings of an author. I

In so many respects, we covered CBS professional football games.These are not essentially creative works, but copyright protectionof them is fixed in a tangible medium of expression as they are: soI think we've long since passed the point where it's necessary to provecreativity. Whether that's right or wrong, I think we find ourselvesin that position.

We may be dealing totally just with a fiction in terms of trying toassign creativeness to finding talent or presenting it or packaging it.But, in that regard, I think you do not find yourselves in a position fardifferent from many other'activities that are, in fact, protected andcovered.

For the record. I 1)robably should(l ask Mr. Gortikov, since I askedthe preceding witness, what the $12 million represente(l, the musician'strust fund there, he mentioned.

Mr. GonT1Kov. First of all, it's more than 12. I think it's somewherebetween 13 and 15. Out of every record sold there's about 11 j percentroyalty that is paid as a result of negotiation with the American Fed-eration of Musicians into funds that were established as a by-productof that negotiation. That 112 percent is split equally in two ways.Half of it goes into something called the M1PTF, Music PerformersTrust Fund, and that is about somewhere between $13 and $15 mil-lion a year. Those funds are administered by a trustee, and they are

used for the employment of live musicians engaged to perform in liveconcerts, open, free to the public. So this money is dispensed thromulevery union local in the United States and Canada for live publicperformances open to the public at which musicians are paid scale.

The other 50 percent of the money. the other $13 to $15 million goesinto something that's called a special payment fund. That is distrib-uted directly to recording musicians pro rata to the number of hoursof recording work they had throughout a given period of time. Sothat's additional income.

Mr. KASTF.XMIR. I wasn't aware of it. Probably something M,'.Petrillo negotiated years ago.

Well. this concludes the hearing,. and we're in(lehted to all of you.Mr. Stewart, who came so far. Mr. Gortikov and all his colleagues.we thank you for your appearance and contributions, not only live.but for the record. This iF the conclusion of the opening procedure interms of the consideration of this question which has been delave,1over to this year. We will have the Register of Copyright testify in

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the near future and perhas others in what I would characterize assupplementary hearings. Yesterday and today constituted the major,fundamental hearings which this organization is considering, and I'monly sorry that more of our colleagues couldn't be here to hear you.

We appreciate being here in Los Angeles, and those of you who camesome distance to be here I know also enjoy the fact that we've selected,I think, an appropriate place for these hearings.

Accordingly, tie hearings are adjourned.

36-510-75 $

PERFORMANCE RIGHTS IN SOUND RECORDINGS

MAY 24, 1978

HousE or REPRESENTATIVEs,SuzCOmIirmE ON CouwRS, CivIL LIBERTIES

AND THE ADMINISTRATION OF JUSTICEOF THE COMMITrE ON THE JUDICIARY,

Washington, D.C.The subcommittee met, pursuant to notice, at 10:15 am., in room

-2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier[chairman of the subcommittee] presiding.

Present: Representatives Kastenmeier, Danielson, Drinan, Santini,Railsback, and Butler.

Also present: Bruce A. Lehman, counsel, and Thomas E. Mooney,Associate counsel.

Mr. K.ASTEN .Em. The subcommittee will be in order.We will have other members of the committee here shortly.This morning, inasmuc- i tlfe House is in session on an important

bill, the Department of Defense authorization bill, we may expect someinterruptions. But we will proceed promptly this morning. I don'tanticipate this need be a long, drawn-out session.

This morning the subcommittee reconvenes for its final 2 days ofhearings on H.R. 6063, introduced by our colleague, Mr. Danielson, leg-islation which would create a performance right in sound recordings.

On March 29 and 30 the subcommittee conducted hearings in Bev-erly Hills, Calif., on the same issue. Those hearings, held in the geo-gralphic heart of our Nation's entertainment industry, provided anopportunity to hear from affected-businesses and interest groups.We receiNed extensive testimony from representatives of broadcast-ing organizations performers' unions, the recording industry and pub-lic interest groups. In addition, we had the opportunity to visit a re-cording studio to see firsthand how a sound recording is made.

Today and tomorrow we will conclude our hearings with testimonyfrom representatives of the five Government agencies with an inter-est in this issue: The Copyright Office, the Department of Justice, theDepartment, of Commerce, the Department of Labor, and the NationalEndowment for the Arts.

Our first witness this morning is a longtime friend of the subcom-mittee, Miss Barba ,-Ringer the-fRister o1-6 yrights.

She is accompanied by five members of her staff who were respon-:sible for preparing the 1,200 page report on performance rights

(111)

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which, pursuant to section 114 of the 1976 Copyright Revision Act, wa%submitted to the Congress earlier this year. That report is now beingprinted by the Government Printing Office ti a committee documentand will be available for distribution within the next few weeks.

On behalf of the entire subcommittee it is a great pleasure to welcomeback to the committee Miss Barbara Ringer, Register of Copyrights.

TESTIMONY OF BARBARA RINGER, U.S. REGISTER OF COPYRIGHT&AND ASSISTANT LIBRARIAN OF CONGRESS FOR COPYRIGHTSERVICES, ACCOMPANIED BY; JON A. BAUMGARTEN, GENERALCOUIfSEL, COPYRIGHT OFFICE; HARRIET OLER, ATTORNEY,COPYRIGHT OFFICE; CHARLOTTE BOSTICK, ATTORNEY, COPY-RIGHT OFFICE; RICHARD J. KATZ, ATTORNEY, COPYRIGHTOFFICE; STEPHEN M. WERNER, ASSOCIATE, RUTTENBERG &ASSOCIATES

Ms. RIN.,GER. Thank you very much, Mr. Chairman.It's a pleasure for me to be here.I am Barbara Ringer, Register of Copyrights, and since I last ap-

peared before your subcommittee I have acquired another title. I amnow Assistant Librarian of Congress for Copyright Services as well asbeing Register of Copyright.

[Ms. Ringer's statement follows:]PREPARED STATEMENT OF BARBARA RINGER, REGISTER OF COPYRIGHTS AND ASSISTANT

LIBRARIAN OF CONGRESS FOR COPYRIGHT SRVCIES, ON I'ERFORMANME RIG]ITS INSOUND RECORDINGS

Mr. Chairman, I am Barbara Ringer, Register of Copyrights and AssistantLibrarian of Congress for Copyright Services. My testimony today is concernedwith the issue of performance rights in sound recordings.

As you know, the Copyright Office has submitted its report on this issue, asrequired by § 114(d) of the 1976 Copyright Act. The purpose of this statementis to present to-your Subcommittee, as briefly and succinctly as possible, a sum-mary of that report's basic conclusions.

On the fundamental issue of public policy, the Copyright Office fully supportthe principle of copyright protection for the public performance of sound record-ings. We believe that arguments to the contrary can no longer be Justified in thoface of extensive commercial use of recordings, with resulting profits to users andharm to creators.

In my opinion there can no longer be any remaining doubt concerning theconstitutional status of sound recordings as the "writings of an author." Thisprinciple was legislatively confirmed with the passage of the 1971 Sound Record-ing Amendment. It was upheld by the Supreme Court, and was reaffirmed byCongress IrA passing the 1976 Copyright Act. It is unreasonable to suggest that awdrk can bb the "writing of an author" for some purposes, such as for protectionagainst-unauthorized duplication, and not for others, such as unauthorized public-performance. To assert this argument sin ly confuses discretionary questionsof statutory policy with the permissible scope of constitutional authority.

The constitutionality of copyright legislation was never based upon an affirma-live showing of "need" on the part of the intended beneficiaries. By the same token.the adequacy of present compensation to the intended beneficiaries is irrelevantto the authority of Congress to "promote the progress of science and the usefularts." While these issues may be important to Congress in evaluating the desir-ability of granting certain rights or withholding others, they bear no significanceto the Constitutional ability of Congress to act.

Performance rights in sound recordings would have no effect upon the First

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Amendment rights of freedom of the press and freedom of speech of broadcasters-and other users. The commercial use of copyrighted works, beyond the limits of-fair use," is ordinarily treated by the courts as copyright infringement, even,%%here the users are in the news media. This is especially so where the use is pri-marily for entertainment purposes, or where access to the material is availablethrough a compulsory license.

Economic arguments against a sound recording performance right have provedto be the strongest and most fervently asserted. Central among these is the,claim, made chiefly by broadcasters, that the benefits to performers and recordlriducers from the airplay of recordings-such as increased attendance at liveperformances, Increased record sales, and increased popularity--are adequatecompensation for the use of recordings. Exposure of recordings through airplayundeniably carries with it the potential for significant economic benefit. Inmost cases, however, the benefits remain just that-potential. Among all record-lIng. that comIte for airplay in the first instance, and also among those thatactually receive it, the realization of these benefits appears to he sporadic andlargely unpredictable. Were predictability does exist, it Is usually closely boundtip with the degree of public acceptance already achieved by a given performer.

It is also argued, again by broadcasters, that the pftyment of performanceroyalties would require the curt..,nment of high-cost, low-return programming,such as public service productions and that, in some instances, marginal stations'would be forced out of business. No concrete evidence has been offered to supportthese contentions, and the independent economic study commissioned by the-Copyright Office indicates that, to the contrary, payment of performance royal-ties is unlikely to cause any serious financial upheaval within the broadcastingindustry.

Rather than representing an economic windfall for performers, performanceroyalties will provide some measure of remuneration to recording artists basedupon the-use of their work. The economic study demonstrates that only a smallpercentage of performers who make sound recordings receive royalties, thatthese royalties are based upon record sales, and that they do not represent a..iniflcant source of income. It is important to emphasize here that the proposedle-islation is intended to benefit all performers on a given sound recordingeliially, and that principal, or "star" artists will receive the same paymentreceived by any other individual contributing to the recording. According toamounts projected from the fee schedule of the Danielson bill, record producersare also not expected to receive excessive income from performance royalties.

With the preemption of state common law under the 1976 Copyright Act, pro-tection of performance rights in sound recordings must come through federallegislation. The Copyright statute provides the most obvious and effective vehiclefor this purlx se. A system of compulsory licensing, with rates initially set by.Congress and subject to periodic review by the Copyright Royalty Tribunal,-appears to be the most desirable method of establishing these rights. This alterna-tive is acceptable to all parties expressing support of the principle of performancerights, and would ensure continued access to sound recordings.

Both performers and record producers ordinarily contribute elements ofcopyrightable authorship to sound recordings. Thus, both should share inroyalties generated from the public performance of these works. While theIDanielson bill provides for an equal split of funds between these two groups,the draft proposal submitted by the Copyright Office would secure a minimum.of fifty percent to performers and leave the remainder subject to negotiationbetween the parties. Additional matters for legislative consideration include the"employee for hire" position of many performers who create sound recordings,.as well as the status of arrangers.

A final comment should be made concerning the International Convention forthe Protection of Performers, Producers of Phonograms, and Broadcasting Or-ganizations (known as the Rome Convention). Although the United States con-trihuted much to the drafting of this document, originally adopted In 1961, ithas never acceded to it. The Convention continues to gain acceptance throughoutthe world, and enactment of performance rights legislation of the kind proposedhere should open the way for this country's participation.

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ADDENDA TO REPORT

PERFORMANCE RIGHTS IN SOUND RECORDINGS

(The following excerpt is taken from Volume 42, No. 59 of the Federal Registerfor Monday, March 27, 1978 (pp. 12763-8).)

[1410-03]LIBRARY OF CONGRESS

COPYRIGHT OFFICE

fDocket No. 877-6-D1

PERFORMANCE RIGHTS IN SOUND RECORDINGS

ADDENDA TO REPORT

On Tuesday, March 21, 1978. the FEDERAL REGISTER published a notice thataddenda to the January 3, 1978 Report of l1,e Register of Copyrights were trans-mitted to Congress and are available for public inspection (43 FR 11773). Thefollowing is the Register's Statement referred to in the previous notice at 43 FIt11774, preceded by the Statement's letter of transmittal. (17 U.S.C. 114.)

Dated: March 22, 1978.BARBARA RINGER,

Register of Copyrights.DANIEL J. BOORSTIN,

Librarian of Congress,MARCH 22, 1978.

DEAR MR. PREsmENT:DEAR MR. SvzAKU :

On January 3, 1978, the Copyright Office submitted tu Congress a Report onPerformance Rights in Sound Recordings, pursuant to the mandate of section114(d) of the 1976 Copyright Act. Pub. L. 94-553. At that time, I indicated theintenJtlon to submit four additional documents as addenda to the original Report.This is to advise you that these documents have been submitted. They include:(1) A Statement by the Register of Copyrights summarizing the position of theCopyright Office on the relevant issues, along with legislative recommendations;(2) mqn independently prepared historical analysis of labor union involvement inperformance rights in sound recordings; (3) reply comments of the independenteconomic consultant who prepared the economic study included in the original'Report of January 3, 1978, and submitted In response to comments on that study:and (4) a bibliography of works dealing with performance rights in soundrecordings.

With the submission to Congress of the addenda described above, the CopyrightOffice believes it has fulfilled its responsibilities under section 114(d). The Copy-right Office is prepared to furnish whatever further assistance the Congress deemsneces.qary in this matter.

Sincerely yours,DANIEL J. BOORSTIN,

lA brarian of Congress.BARBARA RINGER,

Register of Copyrights.

ADDENDUM TO THE REPORT OF THE REGISTER OF COPYRIGHTS ON PERFORMANCERIGHTS IN SOUND RECORDINGS

Statement of the Register of Copyrights containing a Summary of Conclusionsand Specific Legislative Recommendations.

INTRODUCTION

Thp Co'gressional mandate to the Register of Copyrights contained In section114 (d) of the new copyright statute reads as follows:

"O JIanuary 3, 197. the Register of Copyrights, after consulting with repre-sentaftives of owners of copyrighted materials, representatives of the broadcast-

115

Ing, recording, motion picture, entertainment industries, and art organiza-tions, representatives of organized labor and performers of copyrighted materials,

.shall submit to the Congress a report setting forth recommendations as to whetherthis section should be amended to provide for performers and copyright ownersof copyrighted material any performance rights in such material. The reportshould describe the status of such rights in foreign countries, the views ofmajor interested parties, and specific legislative or other recommendations, ifany. r

On January 3, 1978, 1 submitted to Congress our basic documentary report,consisting of some 2,600 pages, including appendices. The basic report includesanalyses of the constitutional and legal issues presented by proposals for per-formance rights in sound recordings, the legislative history of previous proposalsto create these rights under Federal Copyright law, and testimony and writtencomments representing current views on the subject in this country. The basicreport seeks to review and analyze foreign systems for the protection of per-formance rights in sound recordings, and the existing structure for interna-tional protection in this field, including the Rome Convention for the Protectionof Performers. Producers of Phonograns, and Broadcasting Organizations. Thebasic report also Includes an "economic impact analysis" of the proposals forperformance royalty legislation, prepared by an independent economic con-sultant under contract with the Copyright Office.

After reviewing all of the material in the basic report, together with addi-tional supplementary material,1 I have prepared this statement in an effort tosummarize the conclusions I have drawn from our research and analysis and topresent specific recommendations for legislation. With the presentation of thisstatement, the Copyright Office believes that it has discharged all of its responsi-bilities under section 114 (d).

It was understandable that enactment of section 114(d) was greeted withraised eyebrows and cynical smiles. Some of those who favored performancerights In sound recordings viewed it as a temporizing move, aimed at duckingthe issue and delaying Congress' obligation to come to grips with the problem.Others, opponents of the principle of royalties for performance of sound record-ings expressed derision at the idea of entrusting a full-scale study of the problemto an official who had, in testimony before both Houses of Congress, expressed a,personal commitment to that principle. The Register's Report could either helooked on as a time-consuming nuisance that had to be gotten out of the waybefore Congress could be induced to look at the problem agaii, or as somethingthat could be dismissed as worthless because the views of the official responsiblefor it were already fixed and her conclusions were predictable.

Neither the idea nor the drafting of section 114(d) originated with anyone inthe Copyright Office. When approached with the proposed compromise that subl-section (d) reflects, we accepted tile responsibility and the short deadline im-posed by the new subsection with two thoughts in mind :

First, we agreed with those who felt that any full-scale effort to tie enactmentof performance royalty legislation directly to the bill for general revision of tlecopyright law would seriously impair the chances for enactment of omnibus revi-sion. Keeping the subject of performance royalty alive but splitting it off forlater Congressional consideration reduced the twin dangers of lack of time tocomplete work on the bill for general revision, and concerted opposition to the billas a whole.

Second, we also agreed that, with a problem as important and hotly contestedtas this one, Congress should have a fuller record and more thorough researchand analysis on which to base its consideration of proposed legislation. Althiourhthe deadline for the report (January 3, 1978) coincided with the date on whichthe Copyright Office was required to implement the whole new copyright statute,we felt that it would be possible for us to complete both jobs on time.

As-I viewed the mandate in section 114(d), the important thing was to provideCongress with a body of reliable information that would help it to legislateintelligently and effectively on the subject of performance rights in sond record-ings. Regarded in this way, the basic documentary report, together with the other

%Three further addenda are being submitted to Conerpss currently with this esttemonnt ,(1) a report, prepared by an Independent legnl consultant. of the history of Iabor uImloninvolvement with the Issue of performance rovnltie. over the past thirty years: (2) 5supnlementary report by the Independent economic consultant ; and (3) a bibliography onperformance rights In sound recordings.

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three addenda, are far more Important than this statement of conclusions andrecommendations.

In approaching our task under section 114, we set up a project under the lead-ership of Ms. Harriet Oler to address the entire problem without any preconcep-tions and as thoroughly, objectively, searchingly, and comprehensively as possi.ble. Ms. Oler analyzed the problem, laid out the project, and directed its imple-mentation. She and the other members of her team, notably Richard Katz andCharlotte Bostick, deserve the highest praise for the end product of their work.I believe that their basic documentary report, including the independently-pre-pared studies by Stephen Werner and Robert Gorman, will be of immediate valueto Congress in evaluating legislative proposals on the subject and will also be alasting contribution to scholarship and literature in the copyright field.

Let me state it as plainly as possible: none of the material In the basic docu-mentary report or in the other addenda was prepared to reflect or support anypreexisting viewpoint or position of the Register of Copyrights or the CopyrightOffice. The only directions that were given to anyone connected with the projectwere to be as objective and honest as humanly possible--to search out the relevantfacts and law and follow them wherever they might lead. Aside from the generalstatements of the scope of their studies as stated in their contracts, the workdone by Mr. Werner and Professor Gorman was entirely independent of anydirection from the Copyright Office, and th6ir reports were presented exactly asreceived.

As Register of Copyrights since 1973 1 have taken a' consistent and ratherstrong public position in favor of the principle of performance royalties for soundrecordings. This was no secret to anyone when section 114(d) was added to therevision bill and, in enacting that provision, Congress could hardly have expectedme to abandon beliefs and convictions based on many years of personal researchand experience in the field. What it could expect were two separate things: first,as full and objective a study by the Copyright Office of the problem as possible;and. second, an honest and unbiased statement of my conclusions and recom-mendations, as Register of Copyrights, based on a fresh review of the CopyrightOffice study.

This statement is intended to fulfill the second of these two obligations. Myhope is that it will be of some help to Congress in considering this difficult prob-lem, hut that no one attach undue weight to any of its conclusions or recom-mendations. In particular, I hope that it will be considered as entirely separatefrom the Copyright Office's basic documentary report, so that the attacks on myconclusions and recommendations will not undermine the usefulness of the bodyof information brought together in the basic report.

BASIC ISSUES AND CONCLUSIONS

The following is an effort to present. in outline form, the basic issues of publicpolicy, constitutional law. economics. and Federal statutory law raised by pro-posals for performing rights in sound recordings, together with a bare statementof the conclusion I have reached on each of them, and a highly condensed dis-cussion of the reasons behind each conclusion i.1. The Fundamental Public Policy Issue

Is.uc: Should performers, or record producers, or both, enjoy any rights underFederal law with respect to public performances of-sound recodings to which theyhave contributed?

cronclusion: Yes.Discussion: The Copyright Office supports the principle of copyright protection

for the public performance of sound recordings. The lack of copyright protectionfor performers since the commercial development of phonograph records has hada drastic and destructive effect on both the performing and the recording arts.Professor Oorman's fascinating study shows that, in seeking to combat the vasttechnological unemployment resulting from the use of recorded rather than liveperformances, the labor union movement In the United States may In some ways

-hare made the problem worse. It Is too late to repair past wrongs, but this doesnot mean they should be allowed to continue. Congress should now do whatever itcan to protect and encourage a vital artistic profession under the statute constitu-tionally Intended for this purpose: the copyright law.

Broadcasters and other commercial users of recordings have performed themwithout permission or payment for generations. Users today look upon any re-

117

quirement that they pay royalties as an unfair imposition in the nature of a "tax."However, any economic burden on the users of recordings for public performanceIs heavily outweighed, not only by the commercial benefits accruing directly fromthe use of copyrighted sound recordings, but also by the direct and indirect dam-age done to performers whenever recordings are used as a substitute for live per.formances. In all other areas the unauthorized use of a creative work is considereda copyright infringement if it results either in damage to the creator or in profitsto the user. Sound recordings are creative works, and their unauthorized perform-ance results in both damage and profits. To leave the creators of sound recordingswithout any protection or compensation for their widespread commercial use canno longer be justified.2. Constitutional issues

a. lasue.-Are sound recordings "the writings of an author" within the meaningof the constitution?

Conclusion: Yes.Discussion: Arguments that sound recordings are not "writings" and that per-

formers and record producers are not "authors" have become untenable. Thecourts have consistently upheld the constitutional eligibility of sound recordinggsfor protection under the copyright law. Passage of the 1971 Sound RecordingAmendment was a legislative declaration of this principle, which was reaffirmedIn the Copyright Act of 1976.

b. Issue.-Can sound recordings be "the writings of an author" for purposes ofprotection against unauthorized duplication (piracy or counterfeiting), but notfor purposes of protection against unauthorized public performance'

Conclusion: No.Discussion: Either a work Is the "writing of an author" or it is not. If it is, the

Constitution empowers Congre s to grant it any protection that is considered justi-fBed. There is no basis, in logic or precedent, for suggesting that a work is a "writ-ing" for some purposes and not for others.

c. Iasue.-Would Federal legislation to protect sound recording against un-authorized public performance be unconstitutional: (1) if there has been no affirin-ative showing of a "need" on the part of the intended beneficiaries and hence nobasis for asserting Congressional authority to "promote the progress of scienceand useful arts": or (i) If there has been an affirmative showing that compensa-tion to the Intended beneficiaries Is "adequate" without protection of performingrights?

Conclusion: No.Discussion: These are actually disguised economic arguments, not constitutional

objections. Congressional authority to grant copyright protection has never beenconditioned on any findings of need, or of the likelihood that productivity or crea-tivity will increase. The established standard is that Congress has complete dis-cretion to grant or withhold protection for the writings of authors, anti that thecourts will not look behind a Congressional enactment to determine whether or notit will actually provide incentives for creation and dlsseminatLn. It is perfectlyappropriate to argue that a particular group of creators is adequately compensatedthrough the exercise of certain rights under copyright law, and therefore Con-gress should not grant them additional rights. It Is not appropriate to argue thata Federal statute granting theoe rights could be attacked on the constitutionalground that it did not "promote the progress of science and useful arts."

d. Igauc.-Would the establishment of performance rights interfere with theFirst Amendment rights of broadcasters and other users of sound recordings?

Conclusion: No.Diseuasf on: The courts have been generally unreceptive to arguments that the

news media have a right to use copyrighted material, beyond the limits of fair useIn particular cases, under theories of freedom of the press or freedom of speech.These arguments seem much weaker where the copyrighted material is being usedfor entertainment purposes, where the user is benefiting commercially from theuse, or where the use Is subject to compulsory licensing.S. Economic issues

a. Iasue.-Do the benefits accruing to performers and record producers from the"free airplay" of sound recordings represent adequate compensation in the formof increased record sales, increased attendance at live performances, and in-creased popularity of individual artists?

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Conclusion: No. on balance and on consideration of all performers and recordproducers affected.

Discuasion: This is the strongest argument put forward by broadcasters andother users. There is no question that broadcasting and Jukebox performances givesome recordings the kind of exposure that benefits their producers and individualperformers through increased sales and popularity. The benefits are hit-or-missand, if realized, are the result of acts that are outside the legal control of the crea-tors of the works being exploited, that are of direct commercial advantage to theno~er, and that may damage other creators. The opportunity-for benefit throughincreased sales, no matter how significant it may be temporarily for some "hitrecords," can hardly justify the outright denial of any performinz rights to anysound recordings. That denial is inconsistent with the underlying philophy ofthe copyright law: that of securing the benefits of creativity to the public by theencouragement of individual effort through private gain (Mazcr v. Stin, 347 U.S.201 (1964)).

b. I*,se.-Would the imposition of performance royalties represent a financialburden on broadcasters so severe that stations would be forced to curtail orabandon certain kinds of programming (public service, classical, etc.) in favor ofhigh-income producing programming in order to survive?_

'onclu*ion: There is no hard economic evidence In the record to support argu-ments that a performance royalty would disrupt the broadcasting industry, ad-versely affect programming, and drive marginal stations out of business.

Discussion: This has been the single most difficult issue to assess accurately,because the arguments have consisted of polemics rather than facts. An independ-ent economic analysis of potential financial effects on broadcasters was commis-sioned by the Copyright Office in an effort to provide an objective basis forevaluating the arguments and assertions on both sides of this Issue. This studyconcludes on the basis of statistical analysis that the payment of royalties Isunlikely to cause serious disruption within the broadcasting Industry. There arearguments aplenty to the contrary, but there is no hard evidence to supportthem.

c. !**que.-Would the Imposition of a performance royalty be an unwarrantedwindfall for performers and record producers?

('onclu~ion: No.Dlixcrus*ion: As for performers, the independent economic survey commissioned

by the Copyright Office indicates that only a small proportion of performersparticipating In the production of recordings receive royalties from the sale ofrecords and that, even if they do, royalties represent a very small proportion oftheir annual earnings. While the statistics collected with respect to record pro-ducers is less conclusive, the economic analysis concludes that the amountgenerated by the Danielson bill for record companies would be less than one-halfof one percent of their estimated net sales.

e. egal iurca. lsuc.-Assuming that some legal protection should be given to sound re-

-cordings against unauthorized public performance, should It be given under theFederal copyright statute?

Conclusion: Yes.Disc. ion: Considerations of national uniformity, equal treatment, and prac-

tical effectiveness all point to the importance of Federal protection for soundrecordings, and under the Constitution the copyright law provides the appropri-ate-legal framework. Preemption of state law under the new copyright statuteleaves sound recordings worse off than they were before 1978, since previouslyan argument could be made for common law performance rights in soundrecordings.

b. leuc.-What form should protection take?('onchion: The best approach appears to be a form of compulsory licensing

as pirocedurally simple as possible.Di.qrus.qion: No one is arguing for exclusive rights, and it would be unrealistic

to do so. The Danielson bill represents a good starting point for the developmentof definitive legislation.

e. lu.-Who should be the beneficiaries of protection?Conclusfon: There are several possibilities: some performers and record pro.

ducers both contribute copyrightable authorship to sound recordings, they should.both benefit,

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Discussion: Special considerations that must he taken into account Include thefact that many performers on records are "employees for hire," the unequalbargaining positions in some cases, and the status of arrangers.

d. Issue.-How should the rates be set?Conclusion: Congress should establish an initial schedule, which the Copyright

Royalty Tribunal would be mandate to reexamine at stated intervals.Discuasion: It would seem necessary to establish minimum statutory rates at

the outset, rather than leaving the initial task to the Tribunal. Review of thestatutory rates by the Copyright Royalty Tribunal should be mandatory after aperiod of time sufficient to permit the development of a functioning collectionand distribution system.

LEGISLATIVE RECOMMENDATIONS

Section 114(d) asks the Register of Copyrights, among other things, to setforth "recommendations as to whether this section should be amended to providefur performers and copyright owners of copyrighted material by performancerights in such material," and to describe ".peclfic legislative or other recommen-dations, if any."

Based on the conclusions outlined above. -my general recommendation is thatsection 114 he amended to provide performance rights, subject to compulsorylicensing, in copyrighted sound recordings, and that the benefits of this right beextended both to performers (including employees for hire) and to record pro-ducers as joint authors of sound recordings.

Specific legislative recommendations are embodied in the following draft bill,which is essentially a revision of the Danielson Bill (II.R. 6063, 95th Cong., 1stSess. 1077).

DRAFT BILL

A Bill to amend the copyright law, title 17 of the U'nited States Code, to createpublic performance rtgbi with respect to sound recordings, and for otherpurposes.

Be it enacted by the Senate and House of Representatires of the United Statesof America in Congress assembled, That-

SECTION 1. This Act may be cited as "The Sound Recording PerformanceRights Amendment of 1978."

,:Ec'roN 2. Section 101 of title 17 of the unitedd States Code, as amended byPublic Law 94-553, (90 Stat. 2541) is hereby amended by deleting th,. definitionof "perform" and inserting the following: -

"To 'perform' a work means to recite, render, play. dance, or ac. it, eitherdirectly or by means of any device or process. In the case of a motion picture orother audiovisual work, to 'perform' the work means to show its images in anysequence or to make the sounds accompanying it audible. In the case of a soundrecording, to 'perform' the work means to make audible the sounds of which itconsists."

SxcTro 3. Section 106 of title 17 of the United States Code. as amended byPublic Law 94-5,53 (Wt) Stat. 2541) is hereby amended by deleting clause (4) andinserting the following:

6(4) in the case of literary, musical, dramatic, and choreographic works, pan.tomimes. motion pictures and other audiovisual works, and sound recordings, toperform the copyrighted work publicly: and"

Szc'rroN 4. Section 110 of title 17 of the United States Code, as amended byPublic Law 94-553 (90 Stat. 2541) is hereby amended as follows:

(a) In clause (2) Insert the words "or of a sound recording" between thewords "performance of a nondramatic literary or musical work" and "or displayof a work."

(b) In clause (3). Insert the works "or of a sound recording" between thewords "of , religious nature," and the words "or display of a work.":

(r) In clause (4), insrt the words "or of a sound recording," between thewords "literary or musical work" and "otherwise than in a transmission":

(d) In clause (6), insert the words "or of a sound recording" between thewords "nondramatic musical work" and "by a governmental body";

'Error: line should read: "(b) In clause (3), Insert the words "or of a".

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(e) In clause (7), insert the words "or of a sound recording" between the-words "nondramatic musical work" and "by a vending establishment";

(f) In clause S). Insert the words "or of a sound recording emItslying a per-formance of a nondramatic literary work," between the words "nondralatieliterary work," and "by or In the course of a transmission" ; and

(g) In clause (9), insert the words "or of a sound recording embodyinz aperformance of a dramatic literary work that has been so published," betweenthe words "date of the performance," and the words "by or In the course ofa transmission".

SEcTIoN 5. Section 111 of title 17 of the United States Code, as amended by Pub-lie Law ,4-553 iX) Stat. 2541 ) is hereby amended by Inserting, in the second sell-tence of subsection (d) (5) (A), between the words "provisions of the antitrustlaws." and "for pur ses of this clause" the words "and subject to the provis.ioisof section 114(c),".

Sc'ioN O3. Section 11'2 of title 17 of the Unittel States code, as amended IbyPublic Law N-5.3 t94) Stat. 2541 ) Is hereby amended as ftllows :

(a) In subsection (a), delete the words "or under the limitations on exclusiverights in sound recordings specified boy section 114(a)." and insert in their place"or under a compulsory license obtained in accordatince with the provisions ofsection 114(ci,".(b) In subsection (1), delete the reference to "section 114 (a)" and insert "sec-

tion 114(b) (5)".S.:c'rioN 7. Section 114 of title 17 of the United States ('ode n amended by

Public l.aw M-553 it) Stat. 2541 ), It hereby amended In its entirety to read a,4follows :

"I li Scope of exclusie rights in sound rceording-s(a) l.t3 irAIONS ON EXt'I.USIVF ntGHiTS.-IlU additiOn to the limitationls onu PX-

clusive rights provided by setfonis 107 through 112 and svtions I1 through 11 ,.and in addition to the compulsory licensing provisions of stbsection (c) and theexemptions of subsection (d) of this section, the exclusive rights of the oNv-nsrof copyright in a sound recording under clauses (1) through (4) of section 104;are further limited as follows:

( 1 The exclusive right under clause i I) of section 106 is limited to the rightto dudicate all or any part of the sound recorling in the form of phonorecord,.or of copies of motion pictures and other audiovisual works, that directly or In-directly recapture the actual sounds fixed in the recording:

(24 rhv exclusive right under chuse (2) of section 106 Is limited to the rightto prepare a derivative work in which the actual sounds fixed in the siundrecording are rearranget. remixed1, or otherwise altered in the recording:

(3) The exclusive right under clause (4) of section 1063 is limited to the rightto lrform publicly the actual sounds fixel in the recording :

(4 The exclusive rights under clauses (1) through (4 of section 100 (1 notextend to the making, duplication. reproduction, distribution, or performance ofanother s)un(I recording that consists entirely of an independent fixation of othersounds, even though such sounds imitate or simulate those in the copyrightkedsound recording; and

(5) The exclnsive rights under clauses (1) through (4) of section 106 d) notapply to sound recordings Included in elucational television and radio progralits(as defined in section 397 of title 47) distributed or transmitted by or throughpuIlic broadcast ing entities (as defined by section 11. I g 4) : provided, That c,,piesor phonorecord.s of said programs are not commercially distributed by or throughpublic broadcasting entities to the general public.

(11) HtGIITs IN SOUND RECORDING DISTINCT FRoM RIGHTS IN I'NDERLYING WORKSEMBODIED IN RECORDIN.-The exclusive rights slecifled in clau.s (1) through(4) of section 106 with respect to a copyrighted literary, musical or dramaticwork. and such rights with respect to a sound recording in which such literary.musical, or dramatic work is embodied, are separate and independent rightsunder this title.

(c) COMPUt.SORY LICENSE FOR T'tBI.VC PERFORMANCE OF SOUND RECORDINGSR-SItII-jet to the limitations on exclusive rights provided by sections 107 through 112and sections 116 through 111, and an addition to the other limitations on exclu-sive rights provided by this section. the exclusive right provided by clause (4) ofsection 106, to perform a sound recording publicly, is subject to compulsorylicensing under the con(lition% specified by this subsection.

(2) When phonorecords of a sound recording have been distributed to) thepullic in the United States or elsewhere under the authority of the Copyright

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-owNvner. any other liers(,n nmay, Iy coml)lying %%ith the provisions of this subsec-lion, obtain a comioulsory license ti) 1erfornm that sound recording publicly.

t3 Any Ik'rson who wishes to obtain a compulsory license under tills subsec-titi shall fulfill the following requirements:

(A) On or before -, 19--, or at least thirty days before the public per-frmrnance, if it occurs later. such person shall record i the Copyright Office aiilitice statti' an. intentions to obtain a ctinililsory license under this subsection.Such notice shall ie flied ill accordance with requlirements that the Register , fC'iijyrights, after consultation with the Copyright Royalty Tribunal, shall pre-:-crib by regulation. and shall contain the name and address of the compulsorylicensee and any other Information that stich regulations may require. Suchregulations shall also prescribe reqlirenents for bringing the Information itthe, statement ip to date at regular intervals.

I B) the co mlso)ry licensee shall deplsit with the Register of Copyrights, atannual intervals, a statement of account and a total royalty fee for all publicloerfornmantes dWrinig the peril etovered by the statement, based oni tile royaltylprvislons of clauses (7) or (S) of this subsection. After consultation with the'.C(oyright Royalty Tribunal, the Register of Copyrights shall prescribe regilla-tiwis presertling the time limits and requirements for the statement of accountalnd royalty payment.

14 ) Fa lure to rcord the notice, file tie statement, or deposit the royalty feell rtuired lby clatse (3 of this subsection renders the pilblic performance ofat ,ound reetording actionable as an act of infringment under s5'tion 501 and fullystiliject to the remedies Irovided by sections 10"2 through 506 ad 509M.

IS) Royalties under this subsection shall ie payable only for perfornancestit * ,lpyrightl ( sound reo'orlings fixed on or after February 15, 1972.

(6) The comlpulsory licensee shall have the option of computing the royaltyfees payable under tills subsection on either a prorated basis, as provided itieause (71 or on a blanket basis, as provided in clause, kS., and tile annualstatement tof account filed by (he compulsory licensee shall state the basis usedfoor computing the fee.

(7) If computed on a prorated basis, the annual royalty fees payable underthis subsection shall be calculated in accordance with standard formulas thatthe Copyright Royalty Tribunal shall prescribe by regulation, taking into ac-count such factors as the proportion of commercial time, if any, devoted to theuse (of copyrighted sound recordings by the compulsory licensee during the applic-able period, the extent to which the Mmpulsory licensee Is also tile owner ofcopyrFght in the sound recordings performed during said period, and. If consid-ered relevant by the Tribunal, the annual number of performances of copyrighted:sound recordings dilring said period. The Tribunal shall prescribe separate for-mulas in accordance with the following :

SA) For radio or television stations licensed by the Federal ConimunicationsC onmission, the fee shall be a specified fraction of one percent of the sta-tion's net receipts from advertising sponsors during the applicable period:

1 H) For other transmitters of performances of copyrighted sound recordings,Including background music services, the fee shall be a specified fraction of twoloercentuin of tile compulso)ry licensee's gross receipts from subscribers or others'mho pay to receive the transmission during the applicable period : and

I C) For other users not otherwise exempted, the fee shall be based on tienumber of days during the applicable period on which performances of copy-

righted sound recordings took place, and shall not exceed $5 per (lay of use.( I) If iomiputed on a blanket basis, tile annual royalty fees payable under this

.e Ition shall Ie calculated in accordance with the following :(A) For a radio broadcast station licensed by tile Federal ('ommiunicationls

('inmmission. the blanket royalty shall depelnd upon the total amotnt of the sta-t ism's gross receipts froin advertising qponsors during the applicable period

i ) Receipts of at least $25.000 but less than $100,000: $250 .lit) Recelpts of at least $100,000 but less than $200,000 : $7.-:Ilit) Receipts of $200,000 or more : one percentun of the station's net receipts

fr, i advert isina sponsors during the applicable period :(-B) For a television broadcast station licensed by the Federal ('ommulcations

S'umimlssion. tie blanket royalty shall depend on tile total amount of the station'sgross receipts fron advertising sponsors Iuring tile applicable period,

(I) Receipts of a least $1,000,000 hut less " than $4,000,000 : $750;

"Error; line should read: "(I) Receipts of at least $1,000,000 but less".

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(ii) Receipts of $4,000,000 or more: $1,500;(C) For other transmitters of perfonrmances of copyrighted sound recording,,

Including background music services, the blanket royalty shall be two poircentliof the compulsory licensee's gross receipts from subscribers or others who payto receive the transmission during the applicable period ; ,

1)) For other users not otherwise exempted, the blanket royalty shall be $25per year for each location at which copyrighted sound recordings are performed.

(9) Public performances of copyrighted sound recordings by operators of coin-operated machines, as that term is defined by section 116, and by cable systems. asthat term is defined by section 111, are subject to compulsory licensing underthose respective sections, and not under this section. However, in distributingroyalties to the owners of copyright In sound recordings under sections 116 and111. the Copyright Royalty Tribunal shall be governed by clause (14) of this suh-section. Nothing in this section excuses an operator of a coin-operated machineor a cable system from full liability for copyright Infringement under this titlefor the performance of a copyrighted sound recording in case of failure to complywith the requirements of sections 116 or 111, respectively.

(10) The Register of Copyrights shall receive all fees deposited under thissection and, after deducting the rea-Pntable costs incurred by the CopyrightOffice under this section, shall deposit the balance in the Treasury of the UnitedStates, In such manner as the Secretary of the Treasury directs. All funds held bythe Secretary of the Treasury shall be invested in interest-bearing U.S. securltiesfor later distribution with Interest by the Copyright Royalty Tribunal. as pro-vided by this title. The Register shall submit to the Copyright Royalty Tribunal,on an annual basis, a compilation of all statements of account covering the rele-vant annual period provided by subsection (c) (3) of this section.

(11) During the month of September In each year. every person claiming tobe entitled to compulsory license fees under this section for performances dtstingthe preceding twelve-month period shall file a claim with the Copyright RoyaltyTribunal, in accordance with rtquirements that the Tribunal shall prescribe hyregulation. Such claim shall include an agreenient to accept as final, except aprovided in section 810 of this title, the determination of the Copyright RoyallyTribunal in any controversy conceLing the distribution of royalty fetes depl')steilunder subelause (B) of subsection (c) (3) of this section to which the claimant isa party. Notwithstanding any provisions of the antitrust laws, for purls)Sos ofthis subsection any claimants may, subject to the provkions of clause (14) ofthis subsection, agree among themselves as to the proporti[onate division of coi-pulsory licensing fees among them, may lump their claims; together and tile thenjointly or as a single claim, or may designate a common agent to receive paymenton their behalf.

( 12) After the first day of July of each year. the Copyright Royalty Tribunalshall determine whether there exists a controversy concerning the distr'oution ofroyalty fees deposited tinder subelause (B) of this subsection (c) (3) during tiletwelve-month period of which claims have been filed unde- clause (11) of thissection. If the Tribunal determines that no such controversy exists, it shall, afterdeducting Its reasonable administrative - sts under this section, distribute suchfees to the copyright owners and performers entitled, or to their designatedagents. If it finds that such a controversy exists, it shall, pursuant to chapter Nof this title, conduct a proceeding to determine the distribution of royalty fees.

(13) During the pendency of any proceeding under this subsection, the Copy-right Royalty Tribunal shall withhold from distribution an amount suffilcient tosatisfy all claims with respect to which a controversy exists, but shall have discre-tion to proceed to distribute any amounts that are not In controversy.

(14) The royalties available for distribution by the Copyright Royalty Triblnalshall be divided between the owners of copyright as defined in subsection (el.and the performers, as also defined in said subsection, but in no ease shall theproportionate share of the performers be less than fifty percent of the amountto be distributed. With respect to the various performers who contributed to thesounds fixed in a particular sound recording. the performers' share of royaltiespayable with respect to that sound recording shall be divided among them ona per capita basis, without regard to the nature, value, or lengtTi of their respec-tive contributions. With respect to a particular sound recording. neither a per-former nor a copyright owner shall be entitled to transfer his right to theroyalties provided in this subsection to the copyright owner or the performer,

t _

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respectively, and no such purported transfer shall be given effect by the Copy-right Royalty Tribunal.

(d) EXEMPTIONS FROM LIABILITY AND COMPULSORY LICENSIN.-In addition tousers exempted from liability by other sections of this title or by other provisions

of this section, any person who publicly performs a copyrighted sound recordingand who would otherwise be subject to liability for such performance or to thecompulsory licensing requirements of this section, is exempted from liabilityfor infringement and from the compulsory licensing requirements of this section,during the applicable annual period, if during such period-

(1) In the case of a radio broadcast station licensed by the Federal Communica-tions Commission, its gross receipts from advertising sponsors were less than$25,0W0); or

(2) In the case of a television broadcast station licensed by the Federal Com-munications Commission, its gross receipts from advertising sponsors were lessthan $1,000,000, or

(3) In the case of other transmitters of performances of copyrighted soundrecordings, its gross receipts from subscribers or others who pay to receivetransmissions during the applicable period were less than $10,000.

(e) 1)EFINI'IoNs.-As used in this section, the following terms and theirvariant forms mean the following:

(1) "Commercial time" is any transmission program, the time for which ispaid for by a commercial sponsor, or any transmission program that is inter-rupted by a spot commercial announcement at intervals of less than fourteenand one-half minutes.

(2) "Performers" are instrumental musicians, singers, conductors, actors, nar-rators, and others whose performance of a literary, musical, or dramatic workis embodied In a sound recording. For purposes of this section, a person comingwithin this definition is regarded as a "performer" with respect to a particularsound recording whether or not that person's contributions to the sound record-ing was a "work made for hire" within the meaning of section 101.

(3) A "copyright owner" Is the author of a sound recording, or a person or legalentity that has acquired all of the rights initially owned by one or more of theauthors of the sound recording.

(4) "Net receipts from advertising sponsors" constitute gross receipts fromadvertising sponsors less commissions paid by a radio or television station toadvertising agencies.

(f) SOUNDS ACCOMPANYING A MOTION PICTURE OF OTHER AUDIOVISUAL WORK.-The sounds accompanying a motion picture or other audiovisual work are con-sidered an integral part of the work that they accompany, and any person whouses the sounds accompanying a motion picture or other audiovisual work inviolation-of any of the exclusive rights of the owner of copyright in such workunder clauses (1) through (4) of section 106 Is an infringer of that owner'scopyright. However, If such owner authorizes the public distribution of materialobjects that reproduce such sounds but do not include any accompanying motionpicture or other audiovisual wor,- a compulsory licensee under section 116 or111 or under subsection (c) of tl..s section shall be freed from further liabilityfor the public performance of the sounds by-means of such material objects.

SECTION 8. Section 116 of title 17 of the United States Code, as amended byPublic Law 94-553 (90 Stat. 2541) is hereby amended as follows:

(a) In the title of the section insert the words "and sound recordings" afterthe words "nondramatic musical works" and before the colon;

(b) In subsection (a), between the words "nondramatic musical work em-bodied in a phonorecord," and the words "the exclusive right" insert the words"or of a sound recording of a performance of a nondramatic musical work,";

(e) In the second sentence of clause (2) of subsection (c), between the words"provisions of the antitrust laws," and "for purposes of this subsection," insertthe words "and subject to the provisions of section 114(c).";

(d) In clause (4) of subsection (c), redesignate subclauses (A), (B), and(C) as "(B)", "(C)", and "(D)", respectively, and Insert a new subelause (A)as follows:

"(A) to performers and owners of copyright In sound recordings, or theirauthorized agents, one-eighth of the total distributable royalties under thissection, to be distributed as provided by section 114(c) (14)," and in the newly-designated subelause (B), between the words "every copyright owner" and thewords "not affiliated with" insert the words "of a nondramatic work".

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SECTION 9. In section 801 of title 17 of the United States Code, as amendedloy Public Law 94-553 (90 Stat. 2541), amend subsection (b) (1) as follows: inthe first sentence, between the words "as provided in sections" and "115 and 116,and" insert "114,"; and in the second sentence, between the words "applicableunder sections" and "115 and 116 shall be calculated" insert "114.". Amendsubisection (b) (3) by inserting, between the words "Copyrights under sections111" and "116, hnd to determine" the following: ", 114,".

S:CTION 10. In'subsection (a) of section 804 of title 17 of the United StatesCode. as amended by Public Law 94-553 (90 Stat. 2541), insert "114," follow-Ing the words "as provided in sections" and "115 and 116, and with", and at theend of clause (2) of subsection (a) add a new subclause (D), as follows:

-1) In proceedings under section 801(b) (1) concerning the adjustment ofroyalty rates under section 114, such petition may be filed in 1988 and in eachsub sequent tenth calendar year."

In subsection (d) of section 804, Insert ". 114," between the words "circum-stances under sections 111" and "or 116, the Chairman".

,4'TxON 11. Amend section 809 of title 17 of the United States Code, as amendedby l'ublic Law 94-553 (90 Stat. 2541), by inserting ", 114," between the words"royalty fees under sections 111" and "or 116, the Tribunal".

SECTION 12. This Act becomes effective six months after its enactment.

COM IENTS ON DRAFT BILL

Among the many detailed questions raised by the Danielson Bill, the draftbill set out above, or both, the following deserve special consideration:

1. Definitions.-The draft bill revises the definition of "perform" in section101 to embrace sound recordings. Another possible amendment in that sectionmight expand the definition of "fixed" to include cases where a work is beingfixed simultaneously with its performance. An important question involves therights (of performers who are employees for hire; the draft bill does not changethe dellnition of "work made for hire" in section 101, but defines "perform-ers" in section 114 in a way that is intended to insure their right to share inperformance royalties despite their employee status.

2. Limitations on Pcrformance Rights Ocncrally.-The draft bill amendsseven of the nine clauses of section 110 to add sound recordings to the materialwhose performances are exempted. Should clause (1) of section 110 also beamended to exclude from the exemption performances of sound recordingsgiven by means of a phonorecord known to be unlawfully made? Should clauses(1) and (2) be amended to exclude from the exemptions sound recordingsniade expressly for instructional purposes?

3. Exemption for Public Broadcasting.-The draft bill retains the exemptionsfor public broadcasting now in section 114.

4. Act that Triggcr.s the Compulsory Licenisc.-The draft bill follows theDianielson Bill in making compulsory licenses available when phonorecordsof mm sound recording have been publicly distributed anywhere. It does notlimit the place of distribution to the United States (as In section 115), and Itdoes not adopt proposals to allow a period of free use (30 days was suggesed)before any liability would accrue.

5. Adminitration.-The draft bill follows the pattern established in sections111 and 116 of the Copyright Act of 1976, providing for filing In the Copyright

fli.e and payment of fees there, but entrusting to the Copyright RoyaltyTribunal the tasks of distributing royalties and adjusing rates.

6. Criminal Peiialtics.-The Danielson Bill subjected a user who had notcomplied with the compulsory licensing requirements to full liability for copy-right infringement, but insulated such a user from criminal liability even ifthe infringement was willful. The draft bill restores the possibility of criminalinalties iII this situation.

7. toyaltyi Rates.--The draft bill recasts the rate provisions of the DanielsonBill in an effort to make them a little simpler, but leaves the basic system andammunts largely untouched. The compulsory licensing rates for jukebox findemlwle performances are not increased in sections 116 and 111. so the beneficiariesof those sections would be required to share their pot with performers andrecord producers.

8. ,0ubRtittfirn of Negotiated Liecn.esR.The Danielson Bill allowed for thesubstitution of negotiated licenses and urged the formation of collecting agen-

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cies to make this possible. This raised a n-biiber of practfical problems andinconsistencies, and the existence of the Copyright Royalty Tribunal adds anew factor. The draft bill is based on the premise that all licensing in thisarea will be compulsory.

9. Distribution of Royaltie&.-The Danielson Bill provided for a mandatoryfifty-fifty split between performers and "copyright owners". It did not cometo grips with the status of performers who are employees for hire. The draftbill gives at least fifty percent of the royalties to performers on a per capitabasis, regardless of their employent status, but allows performers to negotiatefor more (not less) than a fifty percent share.

10. Exemption8.-Both the Danielson Bill and the draft provide outrightexemptions to smaller radio and television stations and music services.

11. Definitions of Performer&.-Neither draft mentions arrangers, althoughin practice they are often assimilated to performers. Arguments can be madethat employed arrangers should be entitled to share in the royalties undersection 114.

12. oundtracks.-The draft bill seeks to clarify a difficult question: are"soundtrack recordings" subject to compulsory licensing when they are publiclyperformed?

OTHER RECOMMENDATIONS

Finally, mention must be made-of-the International Convention for theProtection of Performers, Producers of Phonograms, and Broadcasting Orga-nizations (the Rome Convention, adopted in 1961. This nobly-motivated'andambitious international instrument was years ahead of its time, but it hasretained its vitality and has much to offer the United States and its creativecommunities. This country could adhere to the Rome Convention if the pro-posed legislation were enacted, and the possibility should be thoroughly ex-plored at the appropriate time.

[FR Doc. 78-7878 Filed 3-24-78; 8:45 am]

Ms. RINGER. My testimony today is concerned with the issue of per-formance rights in sound recordings, in general, and in particular theDanielson bill, H.R. 6063.

As you mentioned, Mr. Chairman, the Copyright Office has sub-mitted the report on this issue, as required by section 114(d) of the1976 Copyright Act.

The purpose of my testimony is to present to your subcommitteeas briefly and succinctly as possible a summary of that report's basicconclusions and to answer any questions you may have.

Before going further, Mr. Chairman, I would like to introduce mycolleagues at the table.

To my right is Jon Baumgarten, the general counsel of the Copy-right Office.

To my left is Harriet Oler, who was the head of the team thatactually did the job of implementing section 114 (d).

To her left is Charlotte Bostick, attorney in the Copyright Office,who is a member of that team.

To Jon Baumgarten's right is Richard Katz, also an attorney andmember of the team, and at the end of the table to my right is StephenWerner, associate with Ruttenberg & Associates, the firm that didthe independent economic survey that was a part of our report.

I would like to say a little bit about what each one of those did,without going into much detail. I think it is fairly obvious from thereport itself. -

The congressional mandate that you gave us, Mr. Chairman, essen-tially was one of consultation and reporting rather than recommend-ing. i believe that was what you really had in mind.

8-510--78-----

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We were asked under the specific language of the statute to consultwith representatives of various organizations and groups, broadcast-ing, recording, motion pictures, entertainment, arts, organized labor,and performers of copyrighted materials, the whole range of interestgroups that are concerned with this proposal.

You asked us to submit to Congress a report setting forth recoi.mendations as to whether or not these provisions of section 114 shouldbe amended in the way that is proposed, and you asked that we reporton the status of rights in foreign countries, the views of interestedparties, and the specific legislative or other recommendations, if any.

We have done this job, and I would like to give you a very generalsummary of how we went about it.

We started bv setting up the team of which Mrs. Older is the head.This team is still in existence and still functioning, as you can see.

We went public in April of 1977 after the team had organized andmade its plans, and we asked for comments. We received 177 repliesto our request for comments.

Hearings were held in July of 1977, four very. very full days, fromdawn to dusk. Verbatim transcripts of these have been incorporatedin the report.

After the California hearings we pondered whether or not to havea hearing just on the economic issues lxcause the testimony we weregetting was so equivocal that -we didn't feel we could really go for-ward with any conclusions one way or the other without exploringfurther the economic questions that were being raised. We were hear-ing arguments rather than facts.

After considerable discussion within the office we decided to goout on a contract rather than having a hearing. We commissionedan independent survey by a group, and I will ask others to commentif you have questions as to how that was set up, why this group waschosen, and so forth. I think this might be of interest to you.

I will not give any economic testimony this morning, except tomake some general observations, and if you want to probe into theeconomics., Mr. Werner is here.

In addition, as a result of the California hearing, which had somerather interesting testimony concernina the historical background ofthe wars, and I use the word advisedly, within the organized labormovement, on this general issue, we felt it would be useful to have ahistorical summary of how this had merged within the labor move-mu.'nt. and we commissioned an inle)enlent survey. actually, in effect.a legal summary of the history of this )v a pofessor of labor law andcolvright, at the University of Pennsylvania. Robert Gorman.

I regret that a conflict made it impossible for him to be here tndav.I can try to answer any questions vou have on that. study, which is apart of the report. if you would like.

It. is a superb studv and I hope it can be given very wide coverage.The basic parts of the study. the documentary parts. were prepared

by Mrs. Older. Mr. Katz. and Mrs. Bostick. Mrs. Oler's principal re-sponsibility. in addition to planning the whole survey, was the do-mestic case law, the actual legislative jurisdiction, judicial surveygoing back to the 1930's.

Mr. Katz' responsibility was the legislative arena, and le tracedthe legislative history of the subject. Mrs. Bostick prepared a very

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extensive bibliography of both the domestic and form materials onthe subject.

Your mandate called for us to make a full survey of the foreignexperience with respect to performance royalties. Mrs. Bostick andMrs. Older visited seven countries in September of 1977, had a numberof interviews. I believe just, under 50 separate interviews on this sub-ject, and prepared an extensive docuinentation based on those inter-views and other materials that they collected, and they gave a generalsurvey of foreign material and profiles on 8 countries; these are insour reports.

Patrice Lyons prepared an analysis of her own convention, whichis also a pait of your document.

We had the document ready for the deadline of .anuarv 3 exceptfor tie filial go-around, the Gorman report, Mr. Werner was l)repar-ing a reply to the comments on the Ruttenberg study, and I had addedan addendum, which is my own work. and which lid-iake somesuggested amen(lments in fhe Danielson bill.

I would like very much to try to (lisassociate that addendum fromthe rest of the report. I am not in any way trying to deprecate my ownconclusions. I believe in what I said there. but I don't want them tocolor your reaction to the rest of what really was a massive job andwhich'I think was largely the work of Mrs. Older andl her team.

It was inldertdalalle, Mr. ('hainnan, that your enactment of 114(d) was treated with a certain amount of cynicism. It did look justlike a way of putting the problem off on the one hand. and you gave itto someone. namely the Register of ('opyrights in the Copyl:ight Office,who was already ratlili firmly on position, on l)lblic record as havingtaken a position;. so I suspect there were peol)le who felt we were justgoing through motions.

I hope sincerely that is not going to be, the-bltimate result of all ofthese efforts.

We did. in fact, have a history of support of legislation in princil)Oon this subject in the Copyright Office. I was not the first and I don'tthink I'll be the last.

On the other hand. I also had a personal commitment which Iexpressed rather firmly before the Senate and also before your sub-comnnittee. at various tunes. I hope that our work will not be conl-si(lered worthless because of this fact.

MI'. K.xsnEwIIMP. May I interrupt to ask you what l)ersonal coin-mitment vo are referrering to?

Ms. RmioNa~. I have taken a rather strong view that in principle Iper-onally am, and also the Copyright Office under my leadership is,in favor of a royalty for the perfonnance of sound recordings. Thishas been no secret to anyone, however, and I have testified to thiseffect in this room.

Mr. I.sxMr.n. But when o Ry a comitment, yoi make acommitment to someone and you said for a purpose.

Could you expand on thatMs. RINGER. A commitment in principle, Mr. Chairman. I think I

am committed to the principle of copyright and I think I am coin-initted to the principle of protection for perfonnance, the principle ofcreative workers, creators of original materials, being entitled to share

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under copyright principles in the remuneration that comes from theuse of their works. That is the only commitment I am talking about.

What I am really trying to say, Mr. Chairman, and I say it also inthe report, is that no one can really be surprised that I came out withthe conclusions I did. On the other hand, what I am really trying to sayvery plainly, is that we took on this job with two thoughts in mind.

First, that we recognized, as everyone did at the time, that we couldnot go forward with this legislation as part of omnibus general copy-right revision. It was too large a subject, the record was still imminent,and it probably would have killed off general copyright revision.

Second, we felt that Congress should have a fuller record, and thatWe were itandated under section 114 to provide that fuller record. Thiswe really felt we should try to do.

I actually did, in setting up this team, give them an instruction. Thisinstruction was to be absolutely as objective and factual as it was hu-manly possible to be, to take the facts as they found them and to goforward, and not to try to color this in any way, shape, or form.

I had really nothing to do personally with the contents of the basicreport that we presented you with on January 3, plus the economic re-port, plus the Gorman report. None-of this had any direction from me,and the independent contractors did their work also without directionfrom anyone.

I believe this is a factual statement to which I will adhere withoutany qualifications.I do think Mrs. Oler and her team deserve the highest praise for

coming out with what I think is an absolutely objective report. Noneof the material in the basic documentary report or in any of theaddenda was prepared to reflect or support any present existing view-point or position of the Register of Copyrights or the Copyright Office.

The only directions that were given were to be as objective aspossible.

I have tried to divide this into four parts; the basic issue of funda-mental public policy is the first. The second has to do with the issuesof constitutional law that have been raised continuously through thisendeavor. The third deals with the economic issues, which I will sim-ply sketch without going into detail, and the fourth concerns the issuesof Federal statutory law raised by these proposals.

The fundamental policy issue, the one everyone must ask themselvesbefore they go any further, is whether or not performance or recordproducers or both should enjoy any rights under Federal law with re-spect to public performances of sound recordings to which they havecontributed.

My conclusion, Mr. Chairman, is that they should. And I feelstrongly about this commitment or conclusion.

The iCopyright Office doeo support the principle of copyright pro-tection for sound recordings for the public performance of soundrecordings.

The lack of protection for performance since the commercial devel-opment of phonograph records has had a drastic and destructive effecton both the performing and the recording arts. I hope that you dohave an opportunity to read Professor Gorman's study, which is afascinating summary of how technology can simply wipe out a wholearea of creative endeavor.

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It also shows something else, and I think it's something you haveto take into account, that in trying to combat this vast technologyunemployment, which was like a tidal wave, in trying to protect themembers of the organized musicians' unions from the impact of this,the labor union movement in this country did some things that perhapsmade the situation worse. One can understand their desperation andthe fact that you had two factions within the unions in conflict witheach other. This was not as clear at the time as it becomes later on.

But the fact is you had performing musicians who were makingrecords and wanted to be protected against the use of their own recordsin competition with them, and then you had this vast army of unem-ployed musicians who were not making records but were being put outof work by the existence of rv(rds and their performance.

Obviously, the labor union movement in this country had initiallythe experience of technological unemployment resulting from the sud-den emergence of talking pictures and this army of live musiciansbeing put out of work by them, and they were determined not to let thishappen again; the leader, as some of you remember, was, of course,James Caesar Petrillo, who did adopt certain approaches that con-ceivably were self-defeating in the long run. That is what I thinkProfessor Gorinan's study shows, and it is a fascinating survey.

What must be recognized is that it is too late to repair those wrongs,if that is what they are, but it is not too late to try to do somethingto prevent them from continuing. It may be too little, but that does notmean that you should do nothing, and this is really where I come out.

Congress should now do whatever it can to protect and encour-age what I believe is an artistic profession and a vital artistic profes-sion, under the statute that was constitutionally intended for this pur-pose; namely, the copyright law.

Now, broadcasters and other commercial users, but primarily broad-casters, used sound recordings without paying royalties to their per-formers and their producers for generations. In fact, the entire radioindustry, or a certain segment of it, has been built up since televisioncame on the scene from the unpaid use of sound recordings.

Users today generally complain that they are going to have to pay atax now, and they will call it a tax, there is no question about this.They are now confronting the situation that existed in the late 1970's,not the late 1940's and early 1950's, obviously.

However, it seems to me that any economic burden on the users ofrecordings for public performance is outweighed, on balance, not onlyby the commercial benefits that they receive directly from the use ofthe records but also by what I think can be shown to be direct andindirect damage done to performers whenever recordings are used as asubstitute for live performances.

In all other 'areas where you have copyrighted works, and soundrecordings are copyrighted works. you have creative works, and it isconsidered to be a copyright infringement if what the user is doingresults in damage to the creator or in profits to the users, and in thissituation you have both-you have damage and you have profits.

It seems to me that you should look rather closely in this situationat the justification for withholding some pittance of protection. whichis really, in my opinion, all the Danielson bill would provide initially.

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It. does seem to me that sound recordings are creative works andtheir unauthorized performance results in both damage and )rofits,annd that leaving their creators without any protection or compensationfor the widespread commercial use of their creative works can nolonger be justified.

This is my conclusion with respect to the fundamental policy issueconfronting you.

As to the constitutional issues which are raised, usually obviouslyin opposition to this proposal, there are four, and I will try to con-sider them briefly one by one.

The first, which was the only one heard 10 or 15 years ago, is thequestion whether sound recordings are the writings of the authorin the constitutional sense. I think this question has now been effec-tively answered both by the courts and by Congress. The answer is"yes", they are writings. And it seems very hard to me to argueotherwise any more.

The arguments are untenable )ecause of a series of court decisionsthat have inconsistently upheld the constitutional illegality of soundrecordings for protection under the copyright law.

The passage of the 1971 recording amendment, your subcommittee'sbill. which became law in 1972, made sound recordings copyrightablesubject matter but limited protection to antipiracy protection ratherthan to the protection against public performance. It does seem toOne that this was a legislative declaration of the principle of soundrecordings being the writings of the author: it could not be anythingelse. This, of course, was reaffirmed in the 1976 general revision.

The second issue which is heard, and more strongly now, is that,all right, something may be a writing for the sake of piracy, but itcannot be a writing for the sake of performance. You could argue,and it is argued, that a sound recording could be the writing of theauthor for protection against. unauthorized duplication in artifacts.bllt when it comes to performance you are outside of the constitutionalarena.

I cannot. see any real justification for this arguument. Either thework is the writing of an author or it is riot. If it is. Congress is em-owered under the Constitution to grant it protection. There is no

basis, in my opinion, in logic or in precedent. for suggesting that, awork can be a writing for the one purpose of one use and not forauntlher.

You also find this argument, recurring, that Federal legislationwould lbe unconstitutional unless it can be shown either that there isa need, an effective need, for the protection. or that protection underexisting norms are inadequate. These are known as the need and ade-ouacv constitutional arguments. And, in my opinion, these are actuallydis-mised economic arguments.

There is also the issue that, congressional authority to grant copy-rit protection has never been conditioned oin findings of need oradenuacy. These are absolutely questions that vou should considerin reviewing the desirability of this legislation, but not for constitu-tional grounds.

The courts will not look behind a congressional determination thatprotection should be granted under the copyright laws. And it's up

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to you, it seems to me, to decide on economic and maybe social andother grounds whether this is desirable, but not on constitutionalgrounds.

Finally, one hears frequently the first amendment arguments thatlroadcasters in particular are in a sensitive area, and that by with-holding sound recordings from them without some sort of paymentvou would somehow be violating the first amendment. This does notseem to me to hold much water either.

There ire two recent cases that weaken the argument quite effec-tively. One involved the human cannonball you have heard of. And inthat case the Supreme Court itself held that the first amendment didnot give a broadcaster the right to film and show on television a 10-second shot of a human cannonball hurtling through the air, and itwas on the ground that this was, in effect, a sort of creative or quasi-creative work, and that that human cannonball had rights that theSupreme Court was supposed to protect.

The other, which is a little closer at home, involved a news serviceor newsletter that was in effect knocking off the bottom line of theWall Street reports. This was in the financial report area, and theCourt again held that although they were not exactly reporting thewords, using the words of the service, that there was no first amend-ment right to report this as news since there had been a creative in-vestment in what the Wall Street reporter was doing.

There are other cases along the same line, and you will find, Ithink, if you add the jurisprudence up, that there is really not muchargument, even in the public area, even when you are talking aboutnews and the like, but these arguments become infinitely weaker, inmy opinion, when you are talking about using copyrighted materialfor entertainment purposes, commercial entertainment purposes andespecially under the Danielson bill where you are talking about com-piulsory license and are allowing free use without advanced permis-sion. These arguments seem to me rather weak.

Turning to the economic issues, I will not make a big point of these.I guess a lot of what I will say is just that the case is not proven. Thefirst, and it does seem to me the arguments here t-hat the broadcastersmake are by far their strongest, is that as the music industry, as thebroadcasting and as the radio industries have emerged, commercialradio is used a lot as a promotional device. We know that.

It's true, but can you say that the benefits accruing from free airplay, as they call it. of sound recordings works, which could result inincreased record sales, increased attendance at live performances andincreased popularity of individual artists, in particular cases. are suffi-cient justification for withholding protection across the board? I thinkthis is something you will have to consider very carefully.

There is no question that many, many record companies do promotetheir records very vigorously through air play. But I do not believeon balance this is a justification for withholding protection across theboard.

It is all a hit or miss proposition, and it's entirely outside of the con-trol of the people that are doing the creative work, the performers andthe record producers. The popularity of a record may vey well be en-hanced by its being played on the air, but this is completely accidental;

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it's not something over which they have any control. The creators whounder copyright law are normally given control over their market, haveno control in this situation.

The situation, in effect., is anarchic and while some limited number ofperformers and record producers may benefit, in my opinion the greatmass probably does not and, in fact, may very well be hurt by thissituation.

In any case, the opportunity to benefit from having a hit record as aresult of constant playing on disk jockey programs does not seem to meto justify the outright denial of performance rights in any soundrecording.

It does seem to me that this argument is inconsistent with the under-lying purpose and philosophy of the copyright law, that in securingbenefits of creativity to the public by the encouragement of individualeffort, through private gain, you do promote the progress of sciencein the useful arts and thereby ihe public interest.

The second economic argument is that imposition of performanceroyalties would represent a financial burden on broadcasters thatwould have various consequences. Probably the most realistic wouldbe, if you would analyze it, that it might force some marginal broad-casters to drop classical music and public affairs programing and artsprograming and go over to a hard rock or top 40 format, somethinglike that, which is more commercially viable if they had to pay.

In other words, if the balance between profit and loss were so narrowin a particular case, they might very well have to change their format.They might have to abandon certain kinds of programing, and it hasalso been argued that they might actually go out of business, that somemarginal stations would have to close down and that they would haveto charge, everybody would have to charge their advertisers more, andthat this would be passed on to the public.

All I can say on this point, Mr. Chairman, is there are no hard eco-nomic arguments or evidence to support these assertions. And to theextent that the Werner study shedslight on this subject, it runs in theopposite direction, that this would not be the case. I cannot say in myown knowledge, I am not sure anyone really can. There are a greatmany arguments on this whole subject.

On the other hand, what evidence we have does not seem to me to sup-port the broadcaster's assertions. Third, and the last of the economicissues, is whether or not you would simply be stealing from the rich togive to the rich. That, in effect, this would be a windfall unjustified onperformers that were already rich and, in my opinion, this is not reallya valid argument.

The Werner report suggests and indicates that only a small propor-tion of performers participating in the production of recordings receiveroyalties from the sale of records and that even if they do, royaltiesrepresent a very small proi-ortion of their annual earnings.

The statistics with respect to record producers are less conclusive.But, in my opinion, the overall argument that this would be an un-justified windfall does not have any hard economic support. I thinkyou need to look at this, but the fadt is that at least in the performerarea, the beneficiaries would be the entire performer group and not thestars and, I think this, in effect, answers it very effectively with re-spect to individual performers.

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Turning finally to the legal issues that are raised, there are four.The first is whether the copyright statute, the Federal copyright

statute is the place to do this. If you are going to do it, and there hasreally never been any doubt in my mind, that if you are going to dothis this is the place for it. I think it is the constitutional home for"legislation of this sort. You have the whole range of limitations thatare written into the copyright law that could be extended in this areaif you wished to.

I might make a point that what you did in 1976 and which becameeffective on January 1, 1978, in preempting State law in this areahas altered the balance somewhat. One could have made an argumentbefore this year that, of course, there might be the possibility of en-forcing State rights against sound recording performances under theold jurisprudence and by analogy from the unauthorized duplicationcases.

You can no longer make that argument. You have preempted Statelaw in this area, in nmy opinion, very effectively and you simply cannotargue that there is any possibility of anything now. So you are ac-tually, by that act, withholding protection under any law, State orFederal.

Second, what form should the protection take, and it does not seemto me anyone has or could make an effective argument for exclusiverights here. To expect broadcasters or anyone else to do one-on-onebargaining with respect to this mass of sound recordings does notseem very realistic. So what you have, it seems to me, is the alternativeof some sort of the compulsory license, and I think that the Danielsonbill approach is probably about the best you can come up with.

I have thought a good deal about other'alternatives, and it seems tome it's an excellent starting point, and what I have done in a little bitof redraft is to take that as the base and go forward with it ratherthan to try to alter it. I think that is a fair statement.

Third, who should be the beneficiaries of protection, and if youget to this point, I think you will need to consider this very carefully.

There are several possibilities, but I have concluded, after a greatdeal of thought, and we have discussed this a good deal in the office,that both performance and record producers do contribute, maybe notin equal proportions, but they do both contribute to the creative ele-ments that go into a sound recording; it does not seem to me wise towithhold protection from one group or the other, especially since ananalogous and very closely analogous case can be shown in regard tomotion pictures and television programs; you are, in effect, protect-ing, both.

There isn't any effort in the present law to differentiate betweenperformance and motion picture producers or television producers.All of the creative elements that go to make up a creative work areprotected, and those are the people that contribute those elements--the authors of the work.

What is peculiar and special here is the status in this industryof almost all of the performers, not all but almost all, as employeesfor hire, in many cases under collective bargaining arrangements.What you woud ;e doing. it seems to me, if you single out performerswho are employees for hire for expressly identified protection underthis law is something new in U.S. copy ight law.

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You would be acknowledging that these people are not authors asyou have defined authors in the copyright statute, because they areemployees for hire. But you would be insuring them a certain amountof protection, and while this may be a little bit of a jolt at the outset,I come to the conclusion this is really wise.

There isn't any other way to do this if you are going to do it, andit does seem to me what the Danielson bill did indirectly and whatmy redraft. of those sections does very expressly is to say, OK, weare expressly protecting employees for hire under the copyright law,even though we are not considering them authors or copvright owners.

Finally, how should the rates he set and, in this area, I think theDanielson bill was largely drafted before the Copyright RoyaltyTribunal had its structure and responsibilities fixed, and it seemedto me that added a different dimension.

I think with that body in existence and with the uncertainties thatwould emerge from tie's, the best approach is what the Danielsonbill initially did. set the rates in the first bill. and then allow theCopyright "Royalty Tribunal, on the basis of economic and otherevidence, to revise'those rates at certain times.

Finally. Mr. Chairman. I would like to say a word about legisla-tion, international aspects, and perhaps where you go from here.

I would hope that these hearings would be. the beginning of activeconsideration of legislation which would be based on the, Danielsonbill and perhaps would include some of the suggestions which havebeen made.

I think that this is important for more than simply domestic rea-sons. This is a trend that is international in scope, and we are reallyin many ways behind the times in not granting protection in thisarea.

We are an active participants in the development of the Rome Con-vention in the early 1960's. which added the most controversial pro-vision with respect'to royalties and sound recording. We have neverdone anything with that treaty, to our detriment, in my opinion, inother areas as well as this. WVe are a part of a very large internationalcreative community, and it does seem to me that a modest break-through in this-area would greatly enhance our ability to functionon the international level.

Finally. and just as a very personal observation, Mr. Clirman. Irecoznize,(l in mv quest in the hearings we had in Washington andCalifornia that. the hones which I had about 2 years ago that, the pro-ponents of the legislation in this area would r able to sit down withthe opponents and work out some sort of understanding, ny hopes inthat area are not. going to be realized.

I cannot, in my good conscience or heart, blame the broadcasters foropposing this legislation out of hand. This is a generation of broad-casters that has grown up without paying anything, and why shouldthey lie down and pay something. It does not seem reasonable to me atthis stage to expect them to say, yes. of course. go forward, we willpav. One could hope that would take place, but I don't think it's-real-istic to expect it.

On the other hand, what I do see emerging is a power confrontation.I asked questions on both sides as to how this was going to go. and

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that is the only conclusion I could draw, that the broadcasters whosimply don't want to pay it are going to bring their full force to bearon this legislation, and it has been said and I think with some truth,that everybody in the world could be in favor of something and if thebroadcasters were against it it would not go through Congress.

If that is the case, then we are probably going through a futile exer-cise here. But, in my opinion, these things go through gradual phases,and essentially you come to the point where the full just ice and moralityof the situation" becomes kind of overwhelming.

I don't know whether we are there yet. I think there has to be agreat deal more discussion and a great deal more hard legislative work.But the fact that you are having these hearings. Mr. Chairman. thefact that yol are actively considering legislatio-t in this area. seems tome very (desiirable, aud it does seem to me broadcasters should listen towhat they are hearing and perhaps try to figure out whether tlev cansustain ani absolutely negative attitude up into the next. decade of: eventhe next century in this area.

We have seen and they have not seen, but we have seen I think in theoverall historical sense, a whole area of creative endeavor almost de-stroyed bv inistakes on both sides, and by historical forces that per-haps were beyond anybody's control. But ihe fact is that we have dlevery, very grivat, disservice to our performing arts comnmnitv. anl Ithink it. is time the Congress did something to repair that injustice.

Thank ou, Mr. Chairman.[The following material was supplied by Ms. Ringer:]

SOC:i.DED 3RASIL.IRA DE INTRPRETES E PRODUCTORES FONOolnAFICos.Rio dc Jan ciro, May 17, 1978.

MISS BARBARA RINGER,Register of Copyright of the United States of America, Library of the Congress,

W.ashington, D.C.DEAR MIss RINGER: IHaving studied your Report to the U.S. Congress on Neigh-

boring Rights, we received the enclosed Opinion from our Legal Counsel andwould kindly request your personal attention to the points referring to Brazilraised In the said document.

Please let us know if there is any further information required to clarifythl matter.

Thanking you in advance for your kind interest, we remain,Yours faithfully,

CARLos GATIARDO, President.

FREE TRANSLATION OF AN OPINION GIVEN BY TIE LEGAL CONSULTANT OF SOCINPRO

Mr. President, having studied, at the Board's request. the Chapter concerningBrazil in the Report of the Register of Copyright of the United States of Americapresented to Congress In January 1978, I share-the Board's concern that partsof the sail Report nmy cause misapprehension as to the real situation ofSOCINPRO, owing to some incorrect statements contained therein.

It Is not true to say that:(1) SOCINPRO had high administrative charges (see page 6).

As a matter of fact, SOCINPRO's Internal administrative expenses were (andare) moderate (16.4 percent on net collections on average for the last-5 years),this being a source of pride to SOCINPRO's administrators

1 Even adding the collecting expenses by SDDA. the total dedwted from the revenue ofcopyright owners was around 42 percent on average. a low percentage if we take Into on-sideration the small Individual amounts colloctpd, the enormous extension of the tirritorv"and therefore the high eharces eanisI by rolleetina agpnts. Anyway leduetionq were wellunder Ihe '50 to GO percent ' referred1 to ii, he 1pelort, nd it should he noted that partof the expenditur- went to th, campaign for ive-pierforni "ive and social assistant,,. re-viivstesl h% the artistes, which are not related to the main operation of olecting/distributoing public performance fees.

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(2) SOCiN PRO was "operating remote branch offices" (see page 6).Alpart from a small one-room office in the most important town of Sao Paulo, run

by a single clerk receiving a modest wage, SOCINPRO had no branch offices atall.

(3) the CNI)A "by Decision No. 1 suspended SOCINPRO's collection activi-ties" In "response" to criticisms (see page 7).

As everybody knows, through Decision No. 1 (in which the name of SOCIN-PRO Is not even mentioned) the CNDA applied Article 115 of Law No. 5988 whichdetermined to centralise the collection of public performance through one cen-tral office (ECAD). This applied to all performing right, societies (includingUBC, SBACEM, SICAM, SADEMBRA and, of course, SOCINPRO) but wasnot, aq the Report Implies. a measure directed against SOCINIPRO in particular.On the contrary, SOCINPRO supported the measure, as recorded in the minutesof several Board and General Meetings.

(4) SOCINPRO sued successfully in 1976 "to increase Its representation onthe Board" (of ECAI)).

Footnote No. 10 (page 7) expresses false concepts by distoring facts: the law-suit against Decision No. 1 of the CNI)A was not brought by SOCINPRO alonebut by all the performing rights societies jointly. The grounds for the actionwere NOT "to increase" SOCINPRO's "representation" on the Board of ECAD,but to ensure the full and correct implementation of Article 115 of Law No.59W$. according to which all the performing rights societies were to organtseECAD, a legal right which had been denied them by CNDA.

(5) SOCINPRO "cannot continue to operate" with a revenue of 3 percent offees collected (page 7).

This assumption, attributed to "some authorities "is erroneous because OpinionNo. 43/77 of CNDA allows members to make contributions to their society andSOCINPRO's members have provided the necessary funds, voluntary, as demon-strated by the published accounts of the year 1977 attached as Annex I. An-other false assumption is that direct contacts with ECAD will render membershipof SOCINPRO redundant-while correct In theory, this does not correspondto the facts: no member of SOCINPRO has so far applied to ECAD for directpayment (after nearly 3 years of ECAD's existence) and new members areconstantly joining SOCINPRO. 142 having been admitted at the last GeneralMeeting, held on 30 March. 197,. It should be noted that, as Article 98 of LawNo. 4944 (see page 4) provides, the power to collect is invested In the producer.hre is. therefore, no direct link between performers and ECAD.(6) Calculation of broadcasting fees is based on their "gross commercial In-

come". Unfortunately, this is not the case. Broadcasters pay a "forfalt" cal-culated on an estimate of the number of performances, in accordance with a fixedtariff agreed by ECAD and ABERT (the Broadcasters Association). SOCIN-PRO's remuneration is an additional 50 percent of the composers' copyrightrevenue.

From the above analysis, It may he anticipated that third parties, anfongthem those foreign collecting societies with which you are negotiating bilateralagreements, may he misled as to the situation of SOCINPRO and reluctantto enter into contractual relationship with it, not only because of the doubtsimplied as to its past efficiency, but also as to its future stability.

No doubt the report was compiled in absolute good faith but It is clear thatmany misunderstandings arose in the interpretation of the information onwhich the report was based, and it may be that some of the sources from whichthe material was obtained were not the most appropriate.

In view of Miss Ringer's international repriatlon and her widely known pro-fessional integrity, we would recommend to the Board of SOCINPRO to requesther to give her personal attention to these Important details concerning theactual position in Brazil. and we are confident that, after verifying the infor-mation contained In this Opinion, she will take the necessary steps to rectifythis situation, uncomfortable to both parties, by ensuring that the necessaryamendments are made to her Report to Congress. a most Important documentwhich will be referred to as a major source of material by experts in thefield, for many years to come.

HE.NRY JEssEN, Legal Consuitant.

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COPYRIGHT OFFICE,THE LIBRARY OF CONGRESS,

OFFICE OF THE REGISTER Or COPYRIGHTS,Washington, D.C.

Dr. CARLOS GALHARDO,President, SOCINPRO, Soc. Brasileira de Interpretes e Produtwores Fonogra-

flcos Av. Beira Mar. 406-sala 1205, 20.000 Rio de Janciro, BrasilDEAR DR. GALLHARDO: Thank you for your letter of May 17, 1978 connent-

Ing on our report on performance rights for sound recordings, particularly withrespect to the operation and administration of those rights in Brazil. Thisreport Is currently being printed by our Congressional Subcommittee on Courts,Civ-0 Liberties, and the Administration of Justice of the House Judiciary Com-mittee. We will make every effort to have Dr. Jessen's comments Included in theprinted report. If that is Impossible at this ltte date, we will transfer thecomments to the Subcommittee at once for their consideration.

Our report was prepared Independent by attorneys ou my staff under severetime limitations. The statements it contains reflect opinions of Interested par-ties, which my staff was generally unable to verify Independently. Theyadvise me that a staff member met briefly with Dr. Jensen during a meeting inBrazil, and that he suggested contacting Dr. Amaral. Also, staff members at-tempted to meet with Dr. de Costa during their sojourn to Paris, and in NewYork, but he was unavailable. Accordingly, I apologize for any misleading state-mnents In the report, but I assure you that it was, as you suggest, prepared ingood faith.

In response to Dr. Jessen's specific objections, please note that your com-ments on statements concerning SOCINPRO's administrative costs and branchoffices (p. 6) were attributed In the report to "critics of SOCINPRO" and weredocumented to a published article by A. Chaves, "News From Brazil," 93 RevueInternational Du D)roft D'Autcur at 58, 66 (July 1977). The statement on p. 7regarding CNDA was not Intended to imply a causal action, directed only toSOCINPRO, but an effective one, which directly effected SOCINPRO, the only(organization un(ler discussilon at that Ioinit. The same response applies to Dr.Jessen's fourth point. The report makes no pretense of discussing all performingrights societies, but only those most concerned with performing royalties forthe public performance of sound recordings, as distinguished from the under-lying music or other copyrighted works embodied on those recordings. I am cer-tain that Congress will view the report in this very, limited context.

Point five, regarding SOCINPRO's Inability to maintain operation under fherecent 3% restriction, Is presented as an opinion of authorities, which in fact. itis. We certainly take no Independent position on whether or not that will proveto be true. The report in fact acknowledges that SOCINPRO remains an operat-ing body (1). 7), and we have no basis or intent to predict its future. Again. wehave reporfed only what knowledgeable interested parties have told us, in anattempt to be as thorough and objective as possible.

With regard to point 6 (fees collected from broadcasters), our informationwas obtained from the published article by Professor Chaves. That article, atp. 66, states that distribution is based on the number of performances and thatthe sums collected front broadcasters for performances of soun(d recordings "arecalculated on the gross suns Invoiced to announcers on the basis of musicalperformances or the use of phonogranis." Our report iterates that statement bysaying "Broadcasters are to pay fees calculated on their gross commercial incomefrom musical performances or the use of phonograms." I believe this statementreflects Dr. Jassen's comment that fees are calculated on an estimate of thenumber of performances. The report states the actual percentage fees reportedby Dr. Claudio de Souza Amaral.

Again. let me assure you that your comments are most welcome, and thatthey will be given full attention. I regret that we were unable to discuss ourfindings earlier with Dr. Jassen. and regret any misunderstanding that may haveresulted. Our report must be viewed for the limited purpose it was intended: togive Congress an overview of performance rights in other countries as reportedin documented articles and personal interviews. It reflects no political positions,and attempts to be as objective as possible, and as thorough and accurate aswe could make It in the limited time available.

138If you have any further information or comments, please do not hesffite to

Contact me.Sincerely,

BARBARA RINGER.Register of Copyrights.

'Mr. KASTENMIitI. Thank you, Miss Ringer, and I want to compli-ment your staff, to whom you gave credit at the outset for producingwhat at least in sterns of copyright of this committee's work in copy-right is consistent in terms of its voluminous character, and I think'also for the quality of it, and we are indebted to you and to the staff'that you have put together.

I might say that we, have this morning at this moment a. full panelof the subcommittee here, which is very, ver, unusual indeed.

Mr. SAx'nTXr. Oh, Mr. Chairman, please.Mr. 1(ASTEN3WIER. I was not making any reference to the gentleman

from Nevada.M 1'. SA NTINT. Perhaps I am hypersensitive about it.Mr. DRINAN. Mr. Chairnman, the entire subcommittee always comes

when Miss Ringer comes.Mr. Dxmimrsox. I might add the entire subcommittee is not here

until Miss Ringer comes.Mr. KASTENN-:w. I have a number of questions.I will just ask a couple of them before yielding to my colleagues.

1With all of them here, it may take some time.I wonder if you can tell us practically who is affected in what respect,

who would be by adoption of the Danielson bill, or amended versionof it. in its present form, more or less. apart from broadcasters- andfrom musicians, performing artists and sound recording companies.

Are there other entities that may be marginally affected that weought to consider in terms of the intended or unintended reach of thisproposed legislation.

Ms. RiNGE.R. I think the first group you think of are the jukeboxoperators. In effect, they are not'directly impacted by the Danielsonbill. in the sense that they come under their own section, and so theyonly pay a certain amount.

But, in reality, and this is true of other groups too, even if youhave a compulsory license in another area that. has a ceiling, then whenyou get to the point where the rates are going to be raised, then thefact that you have another area where payments are going to be madeis going to affect the rates in that area. And the operators know thisvery well, and that is why they are opposing the legislation.

On the face of it, they would not have to pay any more, but even-tually they probably would, marginally, and T guess even more thanmarginally. The same is true of cable, to a lesser extent, perhaps. Itonly pays certain amounts, but it would be retransmitting on a second-arc basis some recorded music, a little but in the radio area, and to thatextent the rates might be affected later on.

Directly, you have discotheques which do use sound recordings,that is their stock and trade, they use sound recordings for publicperformance, and they are paying copyright royalties for the musicnow to the Performance Rights Society, and presumably they wouldbe very much involved in paying under the bill.

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The other areas, background music services and live situations,restaurants, and so forth that are not discotheques, I think the effecton them would be marginal, but there is a range of use beyond broad-casting and the larger mass media that I mention.

Mr. KASTENMEIER. And osome extent television broadcasting asdistinguished from radio br adcasting.

Ms. RINGER. Yes.Mr. KASTENMEIER. Being marginal.Ms. RINGER. Right.Mr. KASTENMEi. ER. In terms of involving American jukebox opera-

tors, it seems to me one of the difficulties would be if we were to involvethem at once is suggested by the fact that their compliance rate withrespect to existing law is presently so poor and what is, indeed, theprognosis of imposing yet another liability on them, whether or notit's the ability or inability to pay or disinclination or whatever atleast in terms of registration with your office up to the present time.

Ms. RINGER. This is true, Mr. Chairman, although the reasons forit are very, very conjectural, and I don't think we have enough ex-perience to make any firm comments.

The predictions have been that those there-would be about 400,000jukebox registrations, and on the deadline we had vastly fewer thanthat, about an eighth I think of that, in the 50,000 or 60,000 range.It's risen to around 100.000 now. The deadline didn't seem to makeany difference, and one conclusion you can draw is that this really is awidely dispersed industry and the word just has not reached everyone.

On the other hand. I think maybe another prediction was thattiey were waiting there for someboily to put their arm on them, andthat may happen.

Mr. KASTE-.N $IEIFR. Motion pictures and other audio visual workslike sound recordings often have two copyrights; the copyright ofthe playwright, the copyright in the motion picture itself. Whenbroadcasters use these works, do they now have to pay for perform-ance rights for both kinds of copyright?

Ms. RINGER. Normally not, mr. Chairman. Of course, if the broad-caster is doing the packagring, then they have to do the whole clear-ance bit. On the other hand, normally one person. the packager, theproducer, or whoever you want to call it, obtains all of the rights andthen guarantees to the network or the broadcasters, that if they playthi- they will not be infringing any copyrights.

There is an exception to this which you may know, which is in the.music area. and that, of course, is what we are talking about, andthere the broadcasters, network and station alike have their ownlicenses with the Performing Rights Societies for what. are calledsmall rights, the right to perform publicly a nondramatic work. Thedramatic work situation is different.

Mr. KASTENMEIER. Thank you.I might address this question to Mr. Werner.During your study, did you consider the impact of the new perform-

ance rights on consumers?Mr. WERNER. The effect on, for example, the consumer, the effect

on consumers was not considered, and maybe I should directly, Imight want to explain why our first involvement with the. Copyright

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Office actually involved surveying what data was available to assessthe economic impact of a proposed chance as contained in the Daniel-son bill, and so the economic analysis did focus primarily on a dataset that was identifielin this initial feasibility study, and this is why,to some extent, it has the scope that it does have.

The possibilities for creating data on the possible impact on theconsumer price index, the price of records specifically, was not con-sidered because it would be very difficult to get a precise measure ofthe quantitative change.

While it can be stated without too much fear that there will bepossibly an increase in the price of advertising, you know the questionwas, well, to what extent, and we tried to focus in the study on datathat was available that would give us some hard facts on a quantita-tive measure of change.

So, for that reason, we did exclude considerations concerningconsumers from the analysis.

Mr. KASTENM1EIER. As a result of that, you would not want to hazarda guess as to what the impact would be on consumers, notwithstand-ing the fact that you didn't base it on that sort. of data. Would youwant to hazard a guess as to the impact of this legislation onconsumers?

Mr. WE.RNER. If anything, it should be the case that it could be saidthat the price of records would actually go down if the record indus-try does enjoy sonic revenue coming back from the use of its materialin the form of performance royalties from broadcasters.

One argument that we did look at was the possibility that recordcompanies might produce more classical records, things that were lessprofitable from sales, it might be argued that the price of recordswould come down.

However, again, we did not have data on, hard data on which to basesuch a statement and we avoided that in the report.

Mr. IASTE.NMELR. Did you or our organization have any prior workin the field?

For example, for over a decade the question of mechanical royaltyand the economic impact of an increase in mechanical royalties hasbeen an issue. Did your firm participate in that particular question?

Mr. WERNER. Our finn did not participate in the area of copyrighteconomic issues previous to this current involvement.

I might point out that one of the principal reasons for our involve-ment was related to the fact we were already involved with the LaborDepartment in doing a survey of performing artists, their employ-ment, underemployment, and it was because of the fact that we werealready surveying the members on a randomly sampled basis, the mem-bers of the five major performing arts unions, that it was felt wemight pick up on some additional work and research which we haveincorporated this in the report, which might serve the interests of theCopyright Office with respect to this economic impact study.

Mr. KASTENMETF.R. In connection with that, did you conclude pas-sage of this legislation would have an effect on the employment of theperforming artists and, if so, in what connection, what effect would it

ave in the employment or underemployment of performing artists?'Mr. WERNER. With respect to earning, we did discover there are

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many people who have participated in making sound recordings whohave very low earnings, on an annual basis under $7,000 a year. Ihave the figures in this report, but I would say approximately 30 per-cent of those surveyed who had participate in making sound record-ings in 1976 had earnings under $7,000 a year.

The people who make records, and this is clearly documented in oursurvey, are very often not likely to receive anything in the form ofroyalties from sales. Something in the range of 10 or 15 percent ofthose surveyed who had made records eter received something in theform of royalties from sales. And one of the big problems stems fromthe fact there are recoupment clauses, for one thing, among those whomay be entitled to get royalties from sales.

These recoupment clauses require that the record company recoverall of the production costs associated with moneynmaking records andrecords that didn't make money for this recording artist before le canenjoy anything from a current hit.

The other point to bear in mind is that very few of those who makerecords are of the stafus or stature that entitles them to enter intoan agreement whereby they will get some money from the sale ofa record. Again, I want to remind you that numerically, by far, themajority of the artists who will receive royalties from this, shouldit pass, are not the big name stars who are party to such a sales con-tract, but the backup musicians and side men who, in fact, are notparty to a contract whereby they will get some percent of sales.

Mr. SANTINI. Mr. Chairman, could I explore that point with thegentleman?

Mr. KA STENM ETR. I was about to yield to Mr. Danielson. But, yes,I yield to the gentleman for that purpose.Mr. SANTiNI. If I understood your testimony, the backup musicianswere not in a position to do anything about benefits derived fromresale of the records, essentially'was the point you were making, isthat true?

Mr. WERNER. They are not party to a contract whereby they 'receivesome percent of the'royalty from'the sale of the record.

Mr. SATnIN. What is the contractual relationship that is existentbetween the backup musician and the artists or the producer, what isthe relationship there?

Mr. WERNER. You are getting somewhat away, maybe into a legalquestion, and away from the information I can answer directly fromthe survey data Ihave. So I would like to avoid that question, andmaybe someone else on the panel can handle that.

Ms. OLER. I am not an expert but, briefly, from our study we foundthat the backup artists are generally paid when they work a sessionfee, in other words, but,--

Mr. SANTINI. Who do they contract with for that fee?Ms. OLER. Generally it's done through union contracts, but they

get paid from the record company, of course. -Mr. SANTINT. Then the contract is between the backup artist and

the record company ?Ms. OLE% Yes; through the union, though.Mr. SANTINI. Through the collective bargaining process of the union

contract?

36-510--78-- -10

142

Ms. OLER. Right.Mr. SA.NTIN. Could that contract not make provision, going to the

gentleman's point, that there should be some royalty type reimburse-ment for the backup musician?

Ms. OLER. It's possible, but it has not been done.Ms. RINGER. Just to contribute to that, this was the big issue during

the 1930's, and whether they could go after some kind of performanceright based on the use of the record for commercial purposes, orwhether they should try to build on something on top of the union,should build something on top of the contract, the collective bargain-ing contract between the union and the record company, and they did.

They built on these performance trust funds, which were intended,initially, to give employment to unemployed musicians rather thangoing the copyright route, an&it did not work very well, thoughit still exists in'effect.

The wars that emerged later on in the 1950's and I guess early1960's within the American Federation of Musicians involved a con-flict between those who didn't want the money being generated bytheir sessions, the employed musicians, to go only to unemployedmusicians; they wanted some of the action, too, and so there wereadditional arrangements made whereby there are residual paymentsbut, essentially, this is between the record company and the union,and the broadcaster pays nothing in this situation.

Mr. SANTINT. I understand. It does seem to me that perhaps a validaorzimnent can be made that if there are ineouities with regard tobenefits of the performing artist, then those ineouities ought to berectified through the recording company. the principal beneficiaryof the reproduction process. There seems to me to be a very logicalconnection between the two.

Ms. RiNGER. That argument certainly has been made, Mr. Santini,but. of course, a record company isn't getting anything from" the per-formance either, so nobody is sayingg for the performanc 3; it's alll)abPd on sales and. therefore, you have a situation in which---

Mr. SANTNT. But. of course, the performance produces the salesfrom which the record company benefits.

Mrs. RIyEcR. For some hit records. a very small percentage.:1. BUTLErf. Would Vou yield on this poini ?Mr. K,\STVN-IITER. Yes. I yield to the gentleman.

r[1. BITTErF. Just for my'own information, to what extent are )er-formers union members; is it pretty close to 100 percent, in this field?

Ms. RI,,-oE. As far as what is on commercial radio. I think it isvery. very close to 100 percent, except for foreign records.

Mr. BUTLER. Except, for the foreign records?Ms. RTXNGR. Yes.'Mr. BUTLE:R. All right. Thank you.Mr. KASTEN-',IrER. The Chair now yields to the author of the bill,

the gentleman form California, Mr. Danielson.Mr. DANWTmisoN. Thank you, Mr. Chairman, and thank you, Miss

Ringer, and thanks to your entire staff for a massive piece of workon this research.

I blush to confess I have not studied every page of it, but I thinkyou have given us the essence, and it's a tremendous resource to review

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-any questions that. may come up and will be very useful at the time ofmarkup.

I would like to state first, I am not going to ask you many questionsbecause, frankly, I think you have covered the ground very well.

I will just state first of all with respect to the bill which bears myname, I am not set in concrete on any provision. I perceive a bill asbeing simply a vehicle to enable us to conduct hearings, take testi-mony and, hompefully, to serve as the starting point for marking upthe bill that will answer the public needs.

So there is not a solitary provision in that bill that I hold sacred,except, maybe, the name.

I want to make this point for a very good reason. The question ofwhether there should be a 50-.50 split between a performer and recordcompany constantly comes up. I am not bound to that. If you aregoi,, to have to start someplace. 50-50 seems to be about as equitableus anything )ou can pull out of the air. Maybe it should be 60-64, orsomething else.

We can work that out first in markup and. secondly on the basis of theexperience, if this should become law. I want to comment that thequestion has already been raised twice here today. I think we mustkeep in mind what is the thrust of this bill. We are not talking aboutthe contract between the performers and the recording studio, for ex-ample, or between the union and the studio or between the performersinter se. We are talking about something that transpires after we havea completed sound recording. Then, can that recording be used for(commercial purposes without some kind of compensation to the per-formers who draw somelife into it., and the purpose of this bill is toprovide that performers should get some compensation. So should therecord company. How much I don't know, but they ought toparticipate.

I understand the debate, the argument, we have a country that isfounded on, or our economy is founded on, the profit motive, and it hasbeen an excellent, motive for making progress in forms of production,for developing the West, for example, for giving people incentives toproduce beyond what they would normally produce.

It's a great motivation and has done more to bring our standard ofliving up to the highest peak in the world history than anything else.'But there is a unique feature that goes along with the profit motive,and that is it does not provide much incentive to look after the eco-nomic well-being of the competitors.

In fact, it is just the contrary. To make the greatest profit you cutout the competitor as much as you can. Your cost of goods sold is re-(hiced to the lowest possible denominator.

In our profitt system we are Just carrying forward the Biblical man-date, and I an'hesitant in these surroundings to refer to Biblicalmandates, but here is something in the Book of Matthew to the effectthat the worker is worthy of his hire, I think it's chapter 3, but I amnot real sure.

Mr. J)i x..,. If the gentleman would yield, you get a C-plus.Mr. DA.NEwLoN., Thank you. But we carry that-forward all the way

through our'economy. And it crops up in our Constitution, that peo-ple should not be deprived of their property without due process oflaw, and (ue process means usually they should be paid for it.

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If you eat my bread, should I not be paid ?Mr. DmRNAX. You are getting worse.Mr. DANIELSON. That is a D-plus. But that is what we are talking

about here, that perforiaers bring some life into a piece of vinyl orsome magnetic tape and they produce a sound recording, phonograph.which is a marvelous invention, and it can be played over and over andover again and render faithful reproductions of what those perform-ers did.

They are performing it over again and over again and over againbut, unhappily, they get paid but once.

Now, who i)rofits frou-that? The people who use it commercially?There is no ban here, incidentally, from personal use. It's conanerclaluse. Who profits from it? No one except the user.

Now, the radio stations are the principal persons upon whom wefocus here, although commercial users would be covered. What elsedo they use that they sell which they get free? The average radiostation I listen to sells or has two things, it has music, which is ob-viously the phonograph record, and it has news.

Do you suppose they get that news wire free? Do you suppose theAP or UPI ticker in their backroom is coming in without any chargeat all? I don't suppose so.

Do they get their electricity free of charge? I don't think so.When they need a new tube in their broadcasting equipment, do

they get the tube free of charge? They can say, look, we use Ray-O-Vactubes, we get them free. No, that isn't what happens. They go down-town and buy them someplace, at the drugstore or wherever they gotthem. There is nothing they sell, nothing that they use that they getfree except the phonograph record. I mean, the use of the performer'sright.

I think it does violence to my concept of e(uity. I think if theypay for the news wire, they should pay for the music which theyplay. And, in fact, except for the news and the music nobody wouldturn on that radio station in the first place, because the onl1,thincrleft is commercials, and who in the world needs a commercial? I don'tknow.

I don't think we are dealing with welfare here. I don't think weshould consider that by giving a performer some type of residualcompensation for his work that we are indulging in welfare. We aresii,"v paying him for what he has done.

-lie has suffered a damage, if he has lost a reasonable and potentialprofit. The law has recognized his loss of profits for many, many yearsas being a comnensable damage, and I think he is entitled to it.

Now. the radio stations have told us, both in writing and in oral testi-monv, that actually they are benefactors to the performance, that byplaying their works this enhances their reputation and standing ofthese performers. It may for the stars, but it certainly does not forthe background musician, the man or woman whose name never ap-pears on the label, who is never pronounced, who gets nothing fromit except that one day aE-scale.

His or her compensation is not enhanced by a repetitive playing onradio stations, background music arrangements, or anything else, andI cannot believe that the psychic compensation is enough.

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Psychic compensation is not very much for the trombone player whoknows he played the trombone in the background of "Song of India"but his name is not there and there is no money coming in. In fact,nobody will necessarily believe he did play the trombone, so it isn'treally there. We are kidding ourselves when we contend that thatcompensation is a great thing.

Now, someone, I-believe you Miss Ringer, raised the point thatthey will call it a tax. Do I really care what they call it? Everythingis a tax, I suppose, if you have to pay for it. I get a candy bar, and Ipay 15 cents, I suppose that is a tax; I don't know. -_

I don't really care that what they call it, and I don't care aboutthe classical records. I happen to like them, but I don't think it'sthe role of Government to tell people what kind of music they shouldlisten to. If they really want those classical records, they are goingto buy them or they are going to listen to the station that plays them,and if they don't am I to tell them what khid of record they shouldlisten to? I don't think so.

It's not the role of Government to dictate tastes or choice. Youknow. I suppose we could pass some kind of a law or do somethingthat the use of poetry shall be free because it's an uplifting thing,but can you get along with that very long? I don't believe so.

I think your copyright laws will say that Robert Frost is entitledto compensation when his works are played or rendered, or whateveryou want to call it. Even the cannonball has to get paid. That is aform of dance, I guess. But it has to be paid if you are going to useit again commercially, and I think that is very fin-.

Now, in a nutshell'those are my comments. But I want to add this,if I may.

I really appreciate your report and your comments. I think it'sevidently clear that there is no constitutional reason why performancerights should not be granted. There certainly is no legal right, be-cause we either provide it or we do not provide gIt.

I can see no equitable right to deny performance merits, compensa-tion to people who produce something of sufficient value that otherswish to use it. So, it looks to me like what remains is do we get, to workwith some kind of intelligent markup and see what would be a fairway to protect that right, fair to the performers, fair to the users, fairto everybody. And that is what I am looking forward to, and I thankyou.

Mr. KASTFNIMEIER. Thank you.Do any Members have any questions to ask the witness from

California?Mr. ERTEL. Mr. Chairman?Mr. KASTE-2MEEB. Mr. Ertel?Mr. ERTEL. I have a couple of questionsI am not intimately familiar with this and, obviously, I did not get

here during your testimony, but I read it through.On page 4 it states:It's Important to emphasize here that the proposed legislation is intended to

'beiefit all performers on a given sound recording equally, and that principal orstarring artist will receive the same payments as any other individual contrib-vtling to the record.

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Are you saying all performers on the record, regardless of how-minor their part on the record, will get equal payment?

In other words, if I play, and I can think of one, the symbols andI strike a gong, would I get the equal amount as the guy who spentthe whole time performing? Is that fair?

Ms. OLER. What we have done is follow, in our draft legislation,the Danielson bill formula, whereby at least 50 percent would go to.the performers in a lump sum, and that would be distributed equallyamong the performers regardless of the nature or quality of theircontribution. That is right.

Mr. ERTE,. I guess the question is, Is that fair?Ms. OURR. I think it, was a matter of efficacy as much as unytiiig,

that the Government would not be, or Congress, would not be, weigh-ing the quality of a particular performer's contribution.

Mr. ERTEL. My question still is, Is it fair?Ms. RINcEit. 1 sat through the. Senate debatee on this issue in whiel

the provision you are now questioning was absent, and the argumentran that this was an act for the benefit of Frank Sinatra and DeanMartin. Those names recurred frequently in the testimony. After that,in the debate.. After that colloquy, there was, I think, some substan-tial rethinking within the proponents' camp, and the feeling was thatFrank Sinatra or Dean Martin. and those are rather passe names now-adays, we talk about someone else now, I guess-

Mr. BUTLER. Talk ,about a singer.Ms. RINGERi. All right, John Denver is suggestedlto my left.Mr. DANIELSON. Or Little Jack Little.Mr. ERTEL. Or I don't care who we use.*Ms. Ri NcE In any case, lie is able through his bargaining position

to obtain fairly substantial amounts from the sale of the record.Mr. ERTEL. YAts not use a loaded name, if I might. Let's use th'.

person who plays a piano, who may be an excellent performer and'performs throughout the record, and the one. person that comes in,.the one striking the cymbals, should lie get the same?

Ms. RiNGER. le was sitting there; lie or she was sitting there.throughout the session.

Mr. ERTL. Do we pay peol)le in this country for sitting?Ms. RINGER. The use of the cymbals may be very important. It is

in certain cases.* Mr. ERTEL. My question still is, It is fair ?

Mfs. RINRor. Yes; I think it is fair, fairer than the opposite.Mr. ERTEL. How can you justify that as fair?Ms. RiNGER. I cannot possibly quantify the qualitative contribution.

of the individual performer in a particlar record. I think there areprobably arguments that you can make that this is unfair.

As you are suggesting,'obviously, if the violin part is the predomi-nant part and you have just a little bit of percussion. then you are.not exactly dividing it equally, but I am not sure in the area we aretalking about. I am not sure this is gerimane.

I gave tip worrying about this problem a long time ago, Mr. Ertel.Mr. ERTEr. I don't really give up worrying about fairness, and I

think that is something we ought to consider, and I think we havethe problem of fairness here in many performances.

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How about the chap who has just begun his musical career, who maybe a novice, who may have his first job, and the chap who has becomethe accomplished artist, and he is in this background group, he is notthe star who has spent a great deal of time perfecting his skills, he is afirst violinist, or she, is it fair to give that novice who has just begunthe same as that accomplished first violinist?

Ms. RINGER. Maybe not, but let me say two things:First, you have got to have something to divide in terms of payment

before you get to this problem. It's more important to me that the prin-ciple of payment by the user for the commercial use of music is estab-lished than how you divide it once the payment is coming in. I thinkyou have to get over that hump first.

I think you have some points. I am not going to dismiss them outof hand. On the other hand, the performers themselves think this isfair, and I am not sure either of us is in a position to second-guess this.

I think it is fairer than basing it on pure economic power within theunion. And I just don't see any way to quantify contributions of vari-ous performers when they are acting as an ensemble, that is reallyabout my basic answer to you.

Mr. ERTEi Let me go to another subject.You suggested, I guess, that the Commissioner of the Copyrights

collect this money and distribute it ; is that right ?Ms. RINGER. No. The pattern that emerged in the general revision

of the copyright law in two other areas, cable television and jukeboxperformances, involved certain amounts that you in Congress estab-lisl at the outset that are paid at regular intervals.

They are paid into the Copyright Office. but we are simply a con-duit; we account for the money, and pay it into the Treasury where itbecomes a fund that bears interest, by the way. Later on, after claimsare made and evidence is heard, the Copyright Royalty Tribunal,which is a different independent body, separate rather entirely fromthe Copyright Office, on the basis of factual determinations, anld con-ceivably one would perhaps hope for this, agreements among the copy-right owners as to how the money would be used, would determinedhow it was to be paid out. -

Mr. ERr r. My question, following that, Is there any precedent for-this kind of a system wherein the Federal Government is doing basi-cally a fee collection system, and then providing a system for distri-bution of it?

Ms. RINGER. The precedents are principally the ones I just men-tioned which were established by your own subcommittee in the copy-right legislation. There are international precedents of bodies like this,but nothing quite this way. On the other iand, what, you do have hereis a compulsory licensing system which does have precedents in thecopyright field going back to 1909.

Thdre was a copyright compulsory license established in the act thatyour subcommittee just got through revising 2 years ago, which in-volved use without advance permission-it was not a fund, it wason a one-to-one basis-but it was paying in, and that whole system hasbecome collectivized in many respects.

Mr. ERTEL. Who was it paid into? -

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Ms. RIxoE. Into a group called the Harry Fox Office, which is akind of a consortium of music publishers, and then it's paid out underthat. -

Mr. ERTEL. You have also said this would be subject to periodicreview by copyright and we would set the fees. Does this interfere withany collective bargaining you can think of?

M s. RINGER. No. In the sense that you have to assume the wholecompulsory licensing scheme to begin with, in other words, obviouslyif you were starting at this problem in 1930 when the first-

Mr. ERTEL. We are starting it now.Ms. RINGER. Yes, that is right. You have an entirely different indus-

trial situation than you had in 1930-a situation in which the entireradio industry is based on this mass use of records; in this situationyou cannot have individual bargaining, so you have to have some kindof compulsory licensing system if there is to be any payment at all.The money has to go somewhere, and it has to be paid out somehow.

Let me say, Mr. Ertel, this is the way the whole copyright field ismoving, that the business arrangements are becoming so complex thatthis business of an individual author making his own deal, and col-lecting for each use of a particular artifact, is just breaking down. Andyou simply have to take into account, if you are going to have anyremuneration at all for the use of the cop'yrighted works, that therehas to be some kind of collective arrangement.

Mr. ERTEL. I guess what I am saying is, the Congress is going tobe in a position of setting rates and fees. Is this wage and price control?

Ms. RINGER. What the Copyright Act did in 1970, and it did emergeat this table, by the way, this whole idea-

Mr. ERTEL. I guess I could disclaim, or whatever. I was not here.Ms. RiNoEm. But there are some historical events that occurred at

this table, and one of them was establishing a body, a Copyright Roy-alty Tribunal which, under congressional mandate, and with someother clearcut principles and standards to apply will be, and thereare four compulsory licenses in the law, this would be the fifth, if itwere adopted. In all four of those areas the Copyright Royalty Tri-bunal is charged under the statute to review the rates and, to someextent, the terms of the licensing arrangements.

Mr. BERTr,. Do they set them?Ms. RINGER. They are set-by Congress in the first instance, with one

exception, and that is in the public broadcasting area now, and theyare going through a rulemaking process right now that will establisha benchmark in the public broadcasting area on which they willproceed.

But in 1980, they are going to review everything and then at stag-gered intervals thereafter. So Congress, in effect, has said, and I thinkthis was part of the thinking, the protagonists can say far better thanI. because they are sitting here., that the economic and industrial situa-tions are too complex for Congress, through the legislative process,going the whole legislative route, to set these rates and, therefore, itestablished this route, these four areas where you already have acompulsory system.

Mr. ERTEL. I am curious because I am no expert in copyright, I don'tknow a thing about it, and I am trying to learn, and I make thatdisclaimer.

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If I take television pictures, a video tape of a baseball game, andthen reproduce those later, would this be a precedent for paying allof those baseball players for the use of the video tape recordings ofthose ballgames, for instance, -the World Series?

I take a video tape of that, whether it be with a Betamax in a home,and then reproduce them in a bar or some other commercial establish-ment, is this a precedent for saying to those baseball players that youhave performed, it is a skill, it is not a muscle skill, it is not an artisticskill, it's an athletic skill-

Mr. SANTINI. Have you ever seen the Detroit Tigers I They are artistson the field.

Mr. ErTEL. Some are pretty good artists, I guess, the way they con-tort. But is this a precedent for giving them performance rights?

Ms. RINGER. In a way, no, because they are-Mr. ERTEL. They are paid by the individual performer.Ms. RINOm. You are now in the video area where there are a whole

other set of consequences. Vhat a filmed or taped sports-Mr. ErTEL. I am not sure the senses between the eyes, and ears are

that much different.Ms. RINGER. I agree, and that is part of my problem with not having

this legislation. You are giving protection to the sports event whenit is only television; under the copyright law, it is clearly identifiedas a. motion picture or other audio visual work under the law, andI don't know whether the performers are protected or not.

Mr. KASTENHEIFR. I am going to-Mr. DRINAN. Mr. Chairman?Mr. KAsTNr EIER. I am going to allow the gentleman from Penn-

sylvania to pursue this later, but I would like to break in at this pointas much of this is rehashing other matters, and we will return to you,and you can further pursue this, but I would like to have some of theother members who have been waiting have an opportunity to askquestions.

Mr. Butler?Mr. BuTLER. Thank you, Mr. Chairman.Help me a moment. One of the principal beneficiaries of a perform-

ance royalty would be those musicians who play classical music. Iam interested, what is the percentage of the classical musicians thatare foreigners, and after you answer that question, I want to ask youwhat percentage of pop performers are foreigners?

Ms. RINGER. What has happened in some respects in the overallclassical music area is that the costs of sessions became so high thatthere was a fleeing abroad. The classical market dried up in some re-spects, and there Just was not that much demand for records, becauseyou are talking about the sales of records rather than playing of rec-ords.

Mr. BUTLER. I guess that is so. The originators of the performanceare really what I am shooting for.

Ms. RINGER. The session cost, because of the numbers of performersinvolved, were just so much higher here at one time than they wereabroad that there was a lot of fleeing, and a lot of classical iecord-ings, almost all of the opera recordings for a while, were made abroad,and that was true to some extent ofsymphonic music, too.

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It was also true of some background music where you could justhire performers cheaper there than you could here. So that I guessthe obvious conclusion is drawn that the sad plight of the employedperformer in this country became even worse because of that.

Mr. BuTLs. I guess what I am searching for, that is not quite thesame problem with the pop performers.

Ms. RINGFR. No. I think obviously there was a very great fad forBritish rock there for a while, but I don't think it had anything to dowith the pricing.

Mr. BUTLER. Maybe this is classical, I don't know.Ms. RINGER. It is now, I guess.Mr. BUTLER. I guess what I am searching for is a complaint I

received from a person very knowledgeable in this area that it wouldcreate, the rights we create in. this legislation will benefit primarilypeol)le who don't live in the United States when we deal in the classicalnuisic area.

Now. is that a fair statement?Is. RINGER. No. I don't think so, but I am not sure I can tell you

exactly why. It seems to be an overstatement. There is a mix here and,obviously, a record company if it can't get performers in this country,is going'to go abroad. The'fact that broadcasters are asked to pay arather modest amount into a fund that will benefit both record com-panies and performers does not seem to me to affect this one way oranother.

The charge is made, and I did refer to it, that this would further dryup the sources of commercial or other use of sound, of classical soundrecordings. To the extent this was part of the mix there might be somearguments there. But I think the two are basically unrelated issues.This is my own opinion.

Do you want to comment on this?MJr. WER NErt. I was trying to see whether or not we had anything

on the. number of members of the American Musician Guild who arevirtuosos ordinarily and might be engaged in producing records forclassical.

Mfr. BxrrLraR. I won't burden you for the moment, but could yoti ex-plore that and let us have something for the record?

,fr. WRNE.R. I will have to come back with that another time.Mr. BUTLER. Could you do that?Mr. KASTENmER. Would the gentleman from Virginia yield?Mr. BUTLER. Certainly.Mr. K ASTENMEIER. Tlis is part of the colloquy we had in California

in which I guess as the Chair I concluded withl the witnesses from therecording industry, or some other, I am not sure, witnesses that in theclassical field probably 50 percent of the artists just arbitrarily werelikely to be foreign born, and musicians, wherether or not the re-cording was made in this country or certainly released by a recordingcompany, a U.S. recording company, probably made ini Europe, ob-viously except for the British rock stars, that nearly all of the rest,98 percent of the rest would be American musicians and Americanartists except, as I say, for the well-known British rock artists whoprobably would command a fair percentage of the market.

But, as to recording companies, I think it's a little more uncertainwhether the recording company is probably an American company,

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at least they have the release rights, they are the people who prob-ably printed the recordings in the United States, and the artists maybe foreign in the classical field.

Mr. BUTLER. I thank you.Mr. KASTENINErER. However, I think the committee would like

some more definitive information rather than the mere conjecture wehave here.

M1s. RINOER. Let me ask Ms. Oler, and let me say we will provideSou with what information we can on the basis of what facts weave.Ms. OLER. I would also say the point has been made repeatedly if

this legislation is enacted and we do reach agreement with othercountries which have performance rights, and many of which pay asmuch as 90 percent of their recordings by American artists, that theflow back would be, the balance of payments would be largely in favorof American recording artists.

Mr. BUTTLER. All right.I thank vou.MNay I go to another question or yield?Ir. DRINAN. Would the gentleman yield for just a moment?1, unfortunately, have to leave.I just want to thank Miss Ringer and say she is always a great

,educator. -Thank you.Ms. RINGER. Thank you.MI'. 111:T1,E R. I apol(;gize to the gentleman from Massachusetts.)o you want to go ahead and ask questions now?

Mr. KASTENMEFTEn. I will yield to the gentleman from Massachusetts.Nf. I)R.I N-N. No. Miss Ringer, as usual, has made everything very,

very clear, and I have several questions, but I am certain we may haveto lfave another hearing on this matter, but I do thank you and yourassociates again.

Mr. BtTLUR. I think the. election of the synbol striker as the ulti-mate performer, gratuitous beneficiary of this tranmetion is a prettygo4o(I illustration.

Do you basically feel like we are by rewarding a symbol striker, weat,, D'omotinix the progre,,s of science and useful arts as contemplatedby the Founding Fathers? -

Ms. RINGER. Yes, without -ny qualifications.Mr. BtTE R.Thank you.You know more about symbol strikers than I do.How do vou reward excellence when we are uniform in our com-

1pen ;at ion ?

M-f[,. Rix-R F. I am not sure that the quality is what you are reallyasking for. I think you are asking for the quantitative aspect. But, inan ensemble there undoubtedly are some that are more important thanothers, but every one has to be there, and every one contributes. Andit sens to me that what, the ensemble is doing in an ensemble musiclperformance is unquestionably a creative work. There is just no doubtabout this in my mind.

Everyone that. contributes to that is a creator. and I think that youlave to know a little bit about timpani or what have you to realize

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just how creative that is, and what has to go into this in order for thatone sound to come out.

Mr. DANIELN. O.Would the gentleman yield on that point?Mr. BUTLER. Certainly.Mr. DANIELSON. I thiink we may be looking at a different aspect

here. When a record is made, it's my recollection from previous testi-mony, the company, the producer of the record, can hire the musicthat goes along with it, the background music, et cetera.

Now, some of that they might get straight from the hiring halls, justplain union scale, but if they want somebody with some special attri-butes, some high excellence, they pay them more, not just union scalebut they pay them more because they are trying to get somebody who.is absolutely qualified in a given field, a real first-class performer. Butthat has nothing to do with the royalty from performance rights, butit does have to do with his compensation for his day's work.

I think that is a factor you have to consider.Well, I guess my ultimate question here is when we start striking a

balance to distribute it fairly equally, you referred to it as a. pittance.I don't know how to ask you this question exactly, but does this

pittance really justify all of this effort in terms of a cost-benefit propo-sition, what we are imposing on the broadcasters, and what we areimposing on the entire industry to reward the performer, and thatis the ultimate objective? Can you give me some rough idea in dollarshow we could arrive at this?

We know it is a pittance, but can you give it to us in dollars, perhaps,and I would like to know whether you really think this amount justi-fies all this effort?

Ms. RiNGR. The amount that the Werner study came up with isaround $15 million which, in the overall scheme of things, is really apittance.

Mr. BuTLniR. Give it to me in dollars based on the volume of trafficthat produces this $15 million.

What would a performer of an average recording get?Mr. WERNER. We didn't go to that point. We did estimate if the

Danielson bill had been in effect., what would have been collected fromradio and television broadcasting using the blanket royalty rates speci-fied in the bill.

What Mis. Ringer is referring to there, or estimate, is within therange of the broadcasting industry and the record industry. some$15 million to $20 million, perhaps, might be generated, would havebeen generated if the bill had been in effect in 1975.

We have not taken that additional step of determining how muchwould have been received by each person who may have participatedin making a sound recording.

Mr. BuTrm. Answer this for me. Will you select in 1975 a represent-ing report and run it though whatever you run it through, and tell mewhat you think in dollars this would produce for the cymbal pla-yer.if you have got one in a 'Pop orchestra? That would be a pretty goodtrick, but any musician. I want to know really how much we are talk-ing about rewarding them. Is that a big deal? I know it is a big deal.

Mr. WmRuNF. We get paid by the hour, right?Mr. BumnTi We will pay for the performance what it is worth.

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Ms. RING. Of course.I think your question is absolutely valid, Mr. Butler. I think you

are asking something beyond that though. You want to know how thiswould quantify out and whether my pittance characterization is accu-rate, and I think that is absolutely fair.

I have asked myself, though, the basic question that you are askinga number of times, because this is a major effort to go through in orderto come out with something that isn't going to reward very greatlyany individual performance. That is for sure.

My answer is yes, that what you would be doing would be takinga rather modest step to reverse what I think is a major social injustice,which is the lack of protection of any sort that individual performingartists in this country have had. I don't know where it would ead, and

I think that this iswhat scares the broadcasters, because I think theywould see that $15 million, if that is what it is, would become more;$15 million is better than nothing, and they are getting nothing now.

Mr. BUTLER. I thank you, Mr. Chairman.I am not going to argue with the witness. I just don't want my silence

to represent acquiescence.Mr. KAsTENMERP. I think, at least indirectly, this raises a serious

question in my own mind.Why, for example, should not an actor, whether it is a film or any

other fixed medium of expression, also have a copyright to his or herperformance, whether it is in a motion picture or otherwise?

Ms. RINGER. I am going to say something rather bold, which I havesaid before, and I will repeat, and, that is, I think they do.

Mr. ISTENMErIR. The motion picture industry then better be aware,of this.

Ms. RINGER. They are.Mr. RATLSBACK. You mean they should or they do?Mr. KASTENMETER. Should.Ms. RINGER. The existence of motion pictures in the copyright laws.

with certain historical events that brought that about, they were addedin 1912 without a great deal of thought, and as the years went by, ofcourse, there were all sorts of patterns within the industy---collectivebargaining and individual complications and the old saw about thehnatics taking over the asylum at different times. These are the indi-vidual performers who became entrepreneurs and so forth. The motion

-picture industry of course is highly collectivized in the sense thatpractically everything that is top is done under union contracts, andyet there is built into this-and this has been especially true since tele-vision came on the scene and they started using the old motion pictureon television-the whole concept of residuals. And residuals arenothing more or less, in my opinion, than copyright royalties by an-other name, and they are going to performers.

Mr. ICASTENmEER. It does raise the question whether musicians oughtto go to residuals or something short of copyright, or whether screenactors ought to go to a copyright extension.

I yield to Mr. Santini.Mr. SANTINI. Thank you, Mr. Chairman.

* Initially, I want to commend you for the quality and substance ofyour testimony before this committee. At least insofar as this member

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is concerned, it is a pleasure to sit and listen to someone as authorita-tive and as articulate as you are.

This is an issue that is of concern to me, and you have aided me, atleast in dispelling in my mind the constitutional concerns that I have,at least at this point.

I continue to be concerned about stage 3 in your presentation. theeconomic arguments. It does seem to me, in response to the earlier ques-tions, that there are some very legitimate questions that can be pressedon the propriety of transferring this burden to the broadcasters. Itseems anomalous at best, in the context of recent history, wherein re-cording studios, representatives of various artists, promoters, werepaying radio stations for selective playing of various recordings., rec-ognizing the direct financial benefit recording studio or performerwould realize as a consequence of that product ion.

Now in effect we will he punishing them for playing, because how-ever it is characterized, it will be attacks. 'There is a notable lack ofenthusiasm in this country for increased taxes of any denominationor origin.

I don't think it is the 250 bucks that creates the concern as muchat the camel's nose in the door, or tent, as the case may be, dependingon the economic conditions of the recording studio or the broadcast-ins station. But it seems to me that if vou start with 250 and certainadditional administrative burden for reporting, that is only the be-ginning. Rarely are such measures ever rescinded or diminished irtproportion, so the administrative burden grows, the tax grows.

For particularly any rural radio stations, that are imar;inal opera-tions in many instances, at best, it rally looms in dire proportions fol-these marginal operations. Bigger radio stations,, as von suggest. justpass it on to the advertisers. That option isn't as readily available toSlie smaller radio station operators.

I would like to take with you. if you would hell) me, go throughAthow this $15 million to $20 million would be disbursed upon collec-tion. The radio station pays its fee, and where does that money o?

Ms. RIoR. )o Vou want, to pick up) on this? This is more in theeconomic area, and I can answer, but I think others can do it better.

Ms. OL~R. Under our draft. proposal, the radio station and otherpublic users would pay the fmd into the Copyright Office on an an-nual basis. The Copyright Office would make an accounting and sentthe money to the Treasury Demiartment, where it would be. investedin interest-bearing accoumits. Then the, co)yriglht owners. evervoieentitled to payment. under this legislation, would anmmllv file, a claimwith the Coj irig.ht Royalty Ti'ilmal, and the. Royalty 'I rilhunawould then give that monev to them, assuming it were an undisputedmatter. That, is basically how it works.

Ms. Rt.oHE. I think your basic question is, woul,1 the lroadcastershave to worry about what happened to the monev? And the answeris no. That is the way all of these compulsory licenses work; they payinto a fund, and that. is it.

Mr. SANTINI. My question goes more particularly to the disbursalof the moneys rather than to the collection of the money. Assiunina'there is $15"million to $20 million in interes-bearing bonds in theTreasury Depart inent, Sam, who is a noted trumpet player, or, Sherry,

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the drummer, as the case may be, leads a somewhat itinerant existence,goes where the jobs are and moves about.

Sherry or Sam then are going to 'be required to make annual ap-plication for their money as a result of recording that they madeearlier that year or 2 years before.

Is that generally your thought?Ms. RIxGER. I don't think anybody really knows how this would

work out within the union, but it woild be done within the union bytheir regular methods. And there are residual payments within theunion, which I think this would probably hook on to.

Mr. SANTINI. Then the union, the local whose members were in-volved in the production of that record, it makes an annual applica-tion to the Treasury Department for these moneys?

-is. Rix(Fn. No, the overall union would do this, and there is morethan one union in the picture. But basically it would be the AmericanFederation of Musicians, one union with locals obviously.

And I had the same question as you did, Mr. Santini, when we hadour hearings. I asked questions, and the impression I got was that thishad not been worked out in any great detail, but they are trying toestablish the principle, and then they will work it out within theirown outfit. The basic idea was 50 to the record companies, and then 50to the performers unions, with whom the record companies had con-tracts.

Obviously there are going to be some exceptions to this, but basi-cally that would be the plan. I asked if the unions had complete recordsas to who participated in a particular session, and they claim that theydo, and that there would be way to get this into the actual hands of theindividuals. I have not gone beyond this point in trying to work itout. I think you need to. I think you are right.

Mr. SANTIr. I would urge, Mr. Chairman, that these are awfullyimportant details because the mechanism could suggest that the veryinequity that. you wish to reach would in fact never occur, that youwould have, as you suggested, at best, the prospect of a mere pittancedribbling back lown to the individual artist: that the administrativecost entailed in trying to find individual artists or reward individualartists or compel individual artists to make application and appeal forconjures in my mind an immediate administrative burden of sizablel)ropolions. And if we are talking about nickels and dimes and no realrectification. then the question that )oses itself is, Can you justify thiskind of serious administrative burden when all you ultimately are do-intr is providing a pittance in compensation?

Ms. OLE.R. For whatever it is worth, that was one thing we did con-centrate on when we were in Europe-asking how their systemsworked out, and what the administrative costs were. Thev have va,'i-oms systems of various degrees of specificity with which they pay theultimate performer. But g enerolly. in the 54 countries in Europe. theaverage cost for national distribution is _hont 5 percent, and the aver-age administrative cost. for internOfiovn iq somewhere in the neigh-borhood of 15 percent. That is a ball park figure.

Mr. S.%NTTNT. That i, a. valid. fntul response. T would be. concernedvery much,, however. berause nf thejSi.,nifeAnf ,l qparitv between thelVnited States of America aid the countries of Westeni Europe, first

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of all, in geographical size and, second, in population, that you have asignificantly different problem in collecting money in a country of 220million people and disbursing it to the performers than you do in acountry of 14 million or 6 million, and where the performers withinthat country would be much easier to locate. They would probablywork within reasonably fixed geographical boundaries, and that thisis a very, very serious question that ought to be examined in detail.

Ms. OLER. I think at the Los Angeles hearings, Chairman Kasten-meier did ask the record industry and the unions to submit specificproposals on ultimate distribution, and I believe they are workingon that.

Mr. KASTEmNFXER. The witness is correct, if the gentleman fromNevada will yield.

Mr. SANTNI. Certainly.Mr. KASTENMEIER. The Chair will say that it is my understanding

that we will receive these proposed mechanisms within the next fewweeks.

Mr. SANTNI. I appreciate that.Mr. KASTENMEIER. This very question was raised, and it is a valid

question. We would have to know these sums would be managed anddisbursed. We have to have the end result as well as the conceptualaspects firmly in mind before we move forward with legislation.

Mr. SANTIn. A second area of concern of mine is that it wouldseem to me that a more immediate and direct result of the inequityof the performer not receiving just compensation for the performance,whatever it may be, should legitimately be the subject of the bargain-ing relationship between the musician and the person with whom thecontract is entered into, and going to performance royalty conceptand that this kind of resolve would be perhaps a more logical animmediate way to provide a solution to the problem you suggest thansuperimposing Federal Government-national union-individual per-former relationship which are waters in which I don't believe that wehave ever attempted to swim as a nation.

Has there been a relationship like this every created?M s. RINGER. Let me give you a little bit of historical background.

This is going to be oversimplified. The whole tragic story is laid outin Professor Gorman's study, but the answer to your question is yes.This would have been the more logical way to handle it.

Back in the 1930's and 1940's, the radio stations employed a lot ofmusicians, and there was a lot of employment for live musicians invarious fields, and there was a strong union, and then records camein and there was a sort of desperation in the union, in the performercommunity, to try to do something to prevent the use of records indirect competition with live musicians who were then employed on asession basis or otherwise.

At one point the performers had the weapons, the labor weapons,that they could ,se to influence broadcasters, and this is what hap-pened in other countries; in other countries there was a weapon, astrike or other labor weapons, that performers could be against thebroadcasters, but in the AF of M situation I think they went to far.

As a result the Congress passed an act with one dissenting voice, theLee Act, which withheld that weapon from them completely. They

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0111(d not do anthig--stiike. Ncolidary boycott, 0li ing-- ;i,1 as aresult they were Simply deprived of tlI one teal Collective bargainingweapon they had.

And when television came in, there was no longer any desire to hlvelive performances on radio. It was already beginning to dry up, butit is quite dramatic when television really hit the public eye that thereare no full-time employed musicians in any of the radio stations inthe United States today, I anm told, and there were hundreds of thou-sands then, and so there was nobody to strike or do anything, aud theycouldn't have a secondary boycott: so they were complletely deprivedof any ability to deal in this area.

This is when they went to the record companies and tried the trustfund approach, but that didn't work very well either, anil re stltedin furt her controversy.

Mr. SANTIN. Why is that?ISIs. RTNm"IR. What it was, aud I am no big authority Oil 1his-iuy

information comes largely from tie Gorman report, which you have-but essentially the idea was to have a rather massive trust fund thatthe record companies would pay into, and the union itself would spoil-sor without any control, nonprofit perform'ances that would (rive el-1)loyment to musicians.

Well, you think about it, I mean this is playing on the Capitol stepstype of thing or in the school auditorium and so forth, there wiafii'tthat much interest in it, and there wasn't that much employment. ihevwas some, but it wasn't any effective nationwide weapon against tech-nological unemployment. It just didn't keep enough l)erforer- em-ployed on a full-time basis to make it worth their while.

What really happened was that they became. I think, aI little bitfixated on this idea that this is the way to handle it, not copyright, andtherefore they wvre not paying anything in the way of residuals.

T1le collective bargaining arraellients di(l not provide for any1)avtents to lie ezulployeu musicians who-e records were being Ilsed

ove' and over a.,'aini, and sold over anld over again ill multiple co)ies,and this resulted in a great revolt within the A.F. of M., which is doeu-tente(d in (lorman's stly, which is very int, resting , and which re-silited in a complete reqtriuctliing' of t1i 1union an1d, in effect, sonicchlanges in its leadership, and a growing recogri it ion that copy rightwas the wav to (!o.

Mr. S.xrINT. I thank yo, Mr. Chairman.I have fouiid this verv rewardinm. I eo01:d go on for tile l)alance of

the day but my ignorance does not justify tIat kind of time consump-tion. rul ink you very mu-md.Mr. K. -\s'I'I Nu:II. I ieeognile te g('ltlen:jan fronli Ihlitois, AMr.

lIailsback.Mr. Itis|.a. I thank rol. Mr. (hairtuan.I aNi to lhank Barba'ra Rinzxer for again e(du.cating solt, of us

niore lay l)eoe)he, and I certainly am one of them.One of the l)(,r'1111asive arguintw) that iiifuieiics wO Whir we should

hav(, some kin( of aymvietlt of lerforvtinilce rovyalties, is tla'tt we maybe behind, and that there has been a recognition abroad that per-formers should receive. and in some cases do receive, a payment ofroyalty. Ifowvever. there are substanti ol diftl'erece in tle 54 sitite

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of I tiink tlie organizations involved, (tovernmenlt involvement insome cases, and I am curious, for instance to know vhetlier in somoof these other countries are there actually copyright laws that pro-vide for performers royalties. or are tie performers royalties doneby agreement, collective bargaining or negotiation ?

I am curious also whether, for instance, in some comntries insteadof having private broadcasting, you have, in effect, public broadcast-ing, which would mean you might have the general taxpayers payingthese performers royalties.

I wonder if either you or any of your fine people coul a(ldressthat situation.

Ms. ()LR. Yes. There are 54 countries now in the vorl which haveperformance rights by law. Other countries such as France do it sim-ply by contract with performers and broadcasters. bunt the major-

M 1'. RAILSBACK. What is the breakdown?Ms. OLER. Fifty-four countries.Mr. RALSB.\CK. I know about at, 54, but what is the breakdown

among the 54 as to how many countries are doing it by law, and isit ,)y a col)yright type law or what?

Ms. OLER. Fifty-four are doing it by law. It is generally considered

to be a so-called neighboring right. The way the Rome Conventionviews it is in an international sphere, and there are now 20 mekubersin the Rome Convention. inleriational rights covering performersand broadcast organizations.

Mr. RiAILsBACK. Sonie of those laws are similar to the law that hasbeen proposed liere, and by that I mean some of tlwi differentiatebetween normal copyright. )rolection for life, 50 year" or whatever.and they set a reduced--

Ms. OLER. That is true.Mr. RAILSBAK. In other wvordls, they distinguish between the pay

of performers royalties and what an author or composer, that he orshe may receive, wNchi leads me to ask: Is it kind of an extraordinaryright ? Is it part of a general co)yrighit law in most eases? Isn't theiea difference between providing payments for l)erformers and copy-right protection protecting authors and composers?.

Ms. 0()1Ri. Yes, there is, iln a sense. Many of the Western Europeancountries like Germany and Deemnark. or for exampll)le. Austria, viewthese as relate(l rights rather tlal a full copyright. wllill is whattl producers have in Britain.

Mr. R.muSmAtcK. Is tlat what v'(n 11m1n1"t a "ieigri()ringr iight"?AIs. ()iF1. Ye. it is a so-called relate(l rilit. II a practical effect

it works somewhat like a compulsory licelnse ill tlat olive the recordlas been commercially produced. lien another p person can use that)tit nust make a payment to tle pirotcer or lperfoill•er or I)othl.

whiclhever is recognized uider the la,.Mr. R.mitSR.ACK. All right.Now in how many countries do they have the private sector in-

volved to the extent. that it is involved in tlis country, and in lowmany countries do they lhave in etll'e't public broadcasting.

Ms. O,F. I think it is fair to say that most countries in Europehave what you think of when you say pul)lic Iroadcastimr. that is.the government in some way licenses broadcasting stations, but, of

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course, ill Britain, for exaltiple, there is aci illeleidelit l)IodIea-ting,commercial broadcasting station. which gets its revenue solely fromadvertisements, and they, of corlise. also are subject to plyiiecit ofperformance royalties.

Mr. RAILSIIACK. 1ut in r pect to tlose that we call ptihlic broad-casting, are the profits derived froma the public radio broadcastingstations-do they go to the private I)eople that manage the publiclylicensed facility? 'Where do the reveres go?

Ms. OiaEr. The revenues, the luoadcasters' rev'enues gVnt'allv arelimited under the particular legislation.

Mr. RAIS.\C,. Is that because tihey o't have iimciy commercialsales ?

Ms. Ornm. That is right.Mr. RAITSIACK. When I was in France,. We have the wonderful

situation where you are not interrupted with commercials all the time.I wonder if it is more of a public-service-type deal in a lot of thosecountries so that there aren't great profits, or wv-hat ?

Ms. OLER. Not exactly. Most of the broadcasting statutes have gen-eral standards. They license a station but they say tile station has anobligation, which is almost a moral obligation, or it is viewed as almosta moral obligation, to provide a variety of 1)rograming. So you don'thave the station competitiveness whieh you have in this country.

Mr. R.wsn.cK. Right.Ms. OLER. But the government doesn't actually dictate the broad-

casting. the programing as it w,,re. It is ustally an independent board.Mr. R.knsn.w('{. Then are w'om savini or do 1 mderstald that. ill

that case, where they are kimd of ',loselv 51)elvised and they areexpected to do such and so, that there are not m1any profits deived,other than salaries, derived by the people operating tiles, stations?Is that a fair explanation?

Ms. RINGER. We were visited i) t lie I'l)'VsemtatiV'es of the l)t'r-formers of British radio "Commercial Network." 01 grou) of stations.It is a corporation. and there ace stockholders. )ut the amomt ofprofits that they can make-I think it is done il1 perentages-islimited, and what is over that goes back into tle corioration. whichis a corporation, and it is 1)rofitmaking, but theme is no willdfall to

_anybody.Mr. RAILSBACK. Is it a government corporation ?Ms. RiNoR. No; but they have to compete on a, toe-to-toe basis with

others wanting the franchise, and the government does a lot of con-trolling. and they were saddled. if that is the right word, with the sameroyalty contracts and other obligations vis-a-vis performers and copy-right owners at BBC.

Mr. RAILSBACK. I see.Another thing that was told to me. and you milay cale to comment on

this. I am told that the administration of the performers royalty pay-meits program. that there has been a greatt deal of evasion in somecountries where they have set ul) broadastin, right outside the limitsof the sovereign country. In other words. I guess some of them broad-cast from right offshore. They go out tile reqiiired number of miles, andthings like that.

I guess the point I aim trying to qzcI at is, ill this comt my. politically,without a dloumht there is going to h)e. ill my opinion. tremendous diffi-

160

culty getting any kind of new performers' royalty enacted into law,the reason being we have all of tlL.-v rather snill, oftentimes smallradio broadcasters that are in evvyl)ody's districtt, and they are allmotivated, and they ae 'ill golig 4) Ible lol)Iling against your newConcept.

I am just trying to get a 1 wle tll how. in t hose other countries, thesituation ma v have been dtierent.

It seems to me that perhaps were they have performers' royalties,Illey may not har ve had the oppositi, d t( lle con vpt that we have inthis coluit rY. I just wonldered it' had any experience with that.

MNs. OrnI.i:. Yes. T think fromi our interviews in Britain, particularly,the OpI)OSil ion exists there as well. t Ici' t he rates which the govern-ment a r ws or clhares. I guess, for lic(esing for television fees, theuser feevs, are not really governed Iw ,orformers royalties, so everytime the le'rformnance royvalty. an increase is proposed, they do meettlivesalne sort of opposition fron ili iroalceastprs that they do in thiscountry.

Mr. K.STNsrrnlJ. Will tile gent lemian yield ?Mr. B.\msn.cu. Yes.Mr. AxsTM .:1R,. Of courseo th1e bills before ws usually have scaled

down rates or exemptions for the very smallest of the liroadcawtersunder the bill. When von refer to the smallest lroadeastprs. I thinkvol have to he talkinqT about a broadcl.!ster who miv not be affected atall. or will he m1inimally financially affected byl the ,ill.

M'. Uui,~snv'k. As I reall, without lma'insz '.one over it. I thinkwhen you deal with gross income. von aire really not going to be ex-elnn)til', vory many people.

'r,. T ) rr.sx. Will the gntlitwm Yield ni that point ?Mfr. P% ur.sm. Yes.MNr. l.xm:Lsox. I woull lil,e (onl v to state that the initial form of

the bill is not obviously bindin fr on this committee, anl wlhen wver into mark up, we should realistically try to pick out a threshold tl:fl con-forms to economic needs, and whether it is $25,000 or P.50,000. 1 don'tknow.

NFr. D.W. l:rsox. VYe can c,)ss that bridre la ter. -

Mr. 1I.us 'c. You know I al)1)leeiate that, )ut I wNant to remindyou of a fear expressed 1 some of lie broalcasters in response to aquestion that I asked of them, and I asked them are ,'on troubled bythe size of the fee? This was nt the L.A. hearing. Are you concernedabout thle o250. or are von concerCd about the foot in the door?

If the administrative costs are as great .s some have estimated, like12 million, 13 million, or 1-1 million or whatever somebodv estimated,that is going to eat up all of the royalties. I am not sure of those figures,but there has been a charge made that to administer this program isgoing to cost a lot of money.

I anl just saying you know wit lioit a doubt we all have to realize thatthey are concerned that when the tribunal reviews and sees that thepeol)lo that we want to benefit are not getting any royalties, they aregoing to have to do something to escalate it. It is something we aregoing to have to deal with.

T think this is all T have. Mr. ('hairnim.

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Again I want. to tlank mr witnesses.Mr. I(ASTEX:.NIFrI. )o any other meml)ers have questions?Mr. SANTINI. No, Mr. Chairman.11r. \AqTVEX3tFIEIV. If n1ot, the Clair wolhl like to thank Ms. Ringer

and her noble colleagues for their contributions here today. Obviously,we have exploredl many areas, probably not all the areas, as fully as wemiglit, but nonetheless this does make an enormous contribution to thesubcommittee.C's deliberations on this question. It is particularly useful,since all members of the subcommittee were here this morning.

As somebody suggested, we may yet have to have beyond these 2 dayssome further hearing. 1 am notnneessarily anticipating it, but I doanticipate we will le in further touch with the Register of Copyrightsanti/or the Assistant Librarian of Congress for copyright services inthis matter.

Thank von very much.I would like. to call on the Deputy Assistant Attorney General for

the Department of Justice, Mr. Ky Ewing-, who is our next witness.Mr. Ewing, you have a rather brief statement. You may proceed

from it as you wish or in any other form.

TESTIMONY OF KY P. EWING, JR.,- DEPUTY ASSISTANT ATTORNEYGENERAL ANTITRUST DIVISION, DEPARTMENT OF JUSTICE;ACCOMPANIED BY MARK TARLOV, EVALUATION SECTION

Mr. EwIrri. Thank you, Mr. Chai roman.If I may, in the interests of your time situation, I would like to

submit this statement for the. record, and, even though it is brief, sum-marize it even more briefly.

Mr. Ks'rExM:E3ER. W-"ithout. objection, your statement and, indeed,that, of the preceding witness. Ms. Ringer, will be accepted for therecord.

[The information follows:]

STA'rIoMENT OF KY P. EWINO, JR., DEPUTY ASSISTANT ATTORNEY GENERAL, ANTI-TRUST DIVISION, U.S. DEPARTMENT OF JUSTICE

I appreciate the opportunity to testify today on behalf of the Department ofJustice on H.R. 6063, a bill to amend the Copyright Act to provide for per "ormaneerights in sound recordings.

The bill would require certain users of sound recordings, such as broadcast tele-vision and radio stations and background music services, to pay license fees for theright to play copyrighted sound recordings publicly In their commercial opera-tions. One half of these new license fees will ultimately be distributed to the own-ers of the copyrights in the sound recording and the other half will be distributedto the performers.

The bill purports to permit the user, at its ol)tion, to pay the license fee on a per-use, prorated, or blanket basis; however, it does not seen to provide a mechanismfor calculating per-use license fees. The bill also seems to allow for the negotiationof higher license fees than those specified in the bill for blanket or proratedlicenses. but it Is unclear under what circumnstances, if any, such negotiationswould be contemplated. Il general, the liability of most users under the bill willhe fixed by the provisions concerning blanket license fees. These fees are calcu-lated based upon the advertising revenues in toe case of radio and televisionbroadcast users and upon gross receipts in the case of background music services.The bill exempts from the requirement to pay llce'se fees radio stations with grossadvertising receipts of less than $25,000, television stations with gross advertisingreceipts of less than $1 million and background music services with gross sub-

scription receipts of less than $10,000,

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The compulsory license fees will initially be collected by the Register of Copy-rights who will then distribute the fees to copyright owners and performers whohave submitted claims for a portion of the fees. Controversies over the appropriatedistribution of fees among claimants will be settled by the Copyright Royalty Tri-bunal. The bill encourages copyright owners, performers, and users to establish aprivate, nongovernmental entity to assume the collection and distribution func-tions Initially assigned to the Register of Copyrights. The Register of Copyrightswill continue to be involved in the collection and distribution of the compulsorylicense fees as long as "there remain copyright owners, performers and copyrightusers" who are not party to any private collection and distribution entity estab-liahed pursuant to the bill.1

The Hl permits performers and celpyright owners to agree as to time ,propor-tionate division of the compulsory licensing fees among them and to aggregateand jointly file their claims with th, Reg-ister of Coyprights.

The bill exempts front the coverage of the antitrust laws agreements aniongcopyright owners. performers. and users relating to the collection anl distribu-tion of the compulsory licensing fees.

The creation of new property rights In the performance of sound recordingswill necessarily impose increased costs omi users who will lie required to pay thecompulsory licensing fees. These costs will ultimately lie passed onI to the laddiethrough higher advertising rates to sponsos and increased prices for the spomn-sors' products. Of course, th costs imn4osed by the creation EOf these additionalrights should he balan(e against tile 1ienefits which are expected to le derivedfrom supplementing the cuirrent system of compensalilg record companies andperformers in the niarketplace. In this reg-ard it should lbe noted that those rec-ord companies and performers wil) art' mst successful il the iiarketplace arealso likely to receive an equally large prlportilnate share Eof the compulsorylicensing fees. IHowever. the resolution Elf this income distributions issue is essell-tially a balancing of equities on which we express ill ultimate view. Nor do weexpress any view as to whether a workable system Elf compensating claimantscould be implemented under legislation along i he lines (if Ih.R. 6063.

The Department of justice's primary cionerli over this 1bill is with the prE-visions that would confer iliflket illlnulnity from the l)ri)s'ril)tilns, of tile anti-trust laws for the activities of copyright owners and performers ill the collec-tion and distribution of the colpullsory licensing fees. I recogllize that the Copy-right Act contains similar antitrust immnuitles, in the calie television, jukebox.and public broadcasting areas. The Department Ef Justice expressed its opposi-tion to the enactment of this type of lrovision in its October 7, 1975. letter toSenator Eastland concerning the puliic broadcasting i ullIlliltty provision. Weadhere to the position stated in that letter.

Exemptions from the antitirust laws are generally lis-favired because they re-move a principal barrier to anticompetitive behavior. Such ~hel'avilo has thecapacity to impose societal costs not (ontemlplated lby the proposal lill and notjustified by any public lienefit clferred by tile Iimulillity.

Although the inaxhulil lialillity Of llsir's for the payment Ef .irnI illsrylicensing fees Is fixed by the bill. the oppor; unity for collusion among claimantsstill exists. The inununity conferred in the till could argualdy extend Ileyond themere aggregation of clainIs and eluitalde distribution Ef the compulsory licensingfees. Agreements which are intended to injure certain claimants or (lasses ofclaimants or which have the effect of injuring sitch persons might not be action-able under the antitrust lawvs either il a case hrought by the government or anaction brought by an Injured party. Parties, injured by such anticompetitivecond(luct ShIOlh(l not le deprived of their recourse to an antitrust suit In the atb-sence of some compelling justification. I am unaware of the existence of anyJustification, compelling or otherwise, for the illilusioin of tile :ntitrust Immunityprovisions contained in this bill.

Mr. KASTENMEIER. Do you have a colleague?Mr. EwiNG. I would like to introduce Mr. Mark Tarlor of our

Evaluation Section.We have in essence two points to make about this bill, H.R. 6063.First, the creation of new property rights in the performers of sound

1 Use of the word "ai(" raises questions .1s tl w et14r tiillll . t' v 101 11, I 4lll, isNmust remain unaffiliated for the Reister of Comlrhlits to remain tvulvld.

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recordings will necessarily iil)O-e., iirceased costs on users who will berequired to pay the compulsory licensing fees. We believe this billinvolves, in essence, an income redistribution, but at the same time webelieve you must realize that there will be, in total, some increasedcosts to be borne by the users in this country. We take no position andexpress no view as to whether the one outweighs the other. We believethat is a judgment you should nake, but we are, from our point ofview, as competition; analysts and advocates, desirous of pointing outto you that there is an additional cost to the ultimate consumer beingcreated here.

I might add in connection with this first point that we don't expressany view as to whether 11.R. (M013 i. in fact creating a workable systemfor compensating claimants.

Our second major point is really our primary concern, and that iswith tle provision that woull conifer blankvt immunity from the pro-scriptions of the antitrust laws for the activities of copyright ownersand performers in the collection and distributionn of the compulsorylicensing fees.

Generally, exemptions from the antitrust laws are disfavored be-cause they remove a princil)al barrier to anticompetitive behavior. Webelieve that the system being created here could be, as it were, the newgame in town and should not have associated with it an antitrust, im-munity for the various players in that game.

Our basic concern, then, boils down to a concern with tile antitrustimmunity granted under this bill, amnd we oppose that grant of anti-trust, immunity.

I believe that suimnarizes the major points of my statement, tiledetails of whcih will be available to you in the record.

Mr. KASTENMEER. Thank you, Mr. Ewing.By the same token, you would have opposed or perhal)s did oppose,

I am not sure, the. copyright revision bills. It contained certain exemp-tions as well.

Mr. EwiNG. Mr. Chairman. we did oppose the antitrust exemptionin those bills and we expressed tile opposition in a letter of October 7,1975, to Senator Eastland. We continue to adhere to that position.

However, I would like to emphasize that the bill in front of youtoday, H.R. 6063, does have a different kind of antitrust immiiunityfrom that created for either the jukebox or CATV industries -

Mr. KASTENMEIER. Would you spell it, out for us? In what respect ?Mr. Ewixo. Ill several respects.First, the critical difference between the immunity in this hill and

the existing jukebox and CATV immunities is that the existing im-munities go only to the distribution and apportionment of claimsamong the copyright holders, whereas the immunity here goes to thecollection of the fees as well as to the distribution among claimants.

Second, the immunity here may have a more pernicious effect thanthose in the jukebox and CATV areas. This is so because the-natureof the claimant pool here differs markedly from that of the cableor jukebox systems situation. There are relatively few cable systemscompared with the number of broadcast stations nationwide, andCATV draws its )rograming from only a fiwv sources, primarilynetwork or syndicated television programing. This m&kes it easier

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for an individual clainmant to pirement an authenticate(1 claini to animpartial entity; namely, the copyight Tribunal, which has readyaccess to much of the necessary data, and thus is able fairly to adjudi-cate the claim.

The jukebox situation is al.o dilferent inasmuchn as the functionof ascertaining performance credits for individual claimants is al-ready performed by either ASCAP, BMI, or SESAC, which repre-sent most, if not all, of the composers and publishers entitled to pay-ment under those provisions.

u might add that the number of lrsons entitled to compensationunder the bill is many times greater than the niunber of composersand plhlishels etitle-I to distribt ion w 'romn AkSCAP, BM11, oxSESAC.

I eight also add that those three entities are subject to the provisions of the antitrust laws, and indeed are regulated by a series otconsent decrees obtained by the Antitrust Division. Now while it isconceivable that a new organization to monitor jukebox performancerights might be immune from antitrust attack in its administration ofclaims and its distributions to its members, it, hardly seems likely to usthat such a new organization will le created to sul)l)lant the existingorganizations in the field, principally due to the cost of it and themembership duplicat ion.

Mr. Chairman, to continue a very long answer to your question,in the situation created by this bill, performers have neither the ad-vantage of dealing with a relatively small nmber of users or sup-liers, or an existing monitoring system regulated by the antitrust

laws. Nor does it appear that the plerforiers would have an impartialgovernment entity collecting their moneys, investing them at interest,and adjudicating their claims.

Under the bill as it is presently drafted, as opposed to the CopyrightOffice's suggested substitute, the performer is left in the position ofnot being able to represent his own interest, and in fact, as a prac-tical matter, being compelled to join some new entity. This gives thenew entity or entities a leverage over performers. That leverage maybe exercised in either the distribution or the collection process in anynumber of ways. For example, the agencies may exact higher rates orfix rates among competing collective organizations for administering,monitoring, or collecting claims. They conceivably might engage inboycotts of certain claimants to exact, some advantage for other claim-ants. Precedent, Mr. Chairman, for this kind of activity-for thiskind of interelaimant anticompetitive behavior-can be found in theASCAP and BMI activities of the early and mid-1960's. Abuses werecorrected by consent decrees and the contiiningr supervision of a dis-trict judge in New York over the working of these organizations.

Performance groups under this bill, II.R. 6063. would be exemptfrom the antitrust laws, and enable to engage. in anticompetitiveactivities, and this we don't think is healthy, and we oppose it.

Mr'. l(ASTIN3 I:i. 110 ()f thl' unk own factors is wimal sort of en-tities, if aniy, will be created under t his 1ill for tl,1)uIP(;, s of collee'-tion, distribution, aiil al)l)otii neni , but there, are alieadv or ai-zations involving v'irtuallv all tlie lait ies htr, tlere is tie NationalAssociation of Broadcasters. t lre uis t lie Record Indmistry AS)ciationof \ilrica, ald there are tI110 to WO W e l:Iblom 4n-g:ilizatilmi:; \vllicll

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represent the musical performers. Whether or not these organizationsplay a role is another question. But you indicated that you thoughtthat they would be required to form a new organization. I think youwere re erring to broadcasters, were you not?

Mr. EWIN. What I was referring to, Mr. Chairman, was the factthat we think under this system, as a practical matter, the individualperformer is not going to be able to prosecute his own individual claim.Necessarily, in the real world, he will have to get his claims presentedby some organization, whether it is an exising entity or whether it isa new one. The likelihood is that more than one such entity will becreated, and our concern is that when you have those multiple playersin the game, with the prize being large, whether it is $15 million or$200 million, those players should be subject to our normal antitrustlaws, as indeed the players are in the ASCAP-BMI situation.Mr. KASTENIEIFR. Are you arguing that they could effectively dis-charge whatever responsibilities they would have for collection, dis-tribution and apportionment without an exemption?

Mr. EwING. Yes, sir. We think that it is possible to create a systemhere legislatively, without an antitrust exemption, that does not havethe same problems.

Mr. IASTENMEIE. And if they got out of bounds, why you wouldinuneliately bring them into court and obtain a consent decree fromthem presumably to operate within certain-

Mr. EwINo. If they violated the antitrust laws, we would certainlyattempt to bring them into court, and I would say hopefully we couldobtain a consent decree.

Mr. KASTNMFJERt. I think you are correct, in terms of individualmusicians, there are a vast number potentially to be covered, but, onthe other hand, we have any number of, for example, as far as musicoperators, we have presumably thousands or tens of thousands of themthat are covered under the present legislation. We have vast numbersof entities, of individuals or groups, that arm affected by present lawin the cop)yright field, do we not?

Mr. EwING. We have most of the players in the present situationcovered by the antitrust laws. We don't have an enormous exemption,except where Congress created it for the cable and jukebox situations.

Mr. KASTE-3wEIER. Yes.Mr. EwINo. I tried to explain why we believe this is very different

as it is presently drafted.Mr. KASTENM EMR. Let me ask you whether you have examined pros-

pects, alternatives, to the extent that you could suggest that therewould be as efficient and as economically a method of distribution ofroyalties without this antitrust exemption. We are talking about amore complex system that would have to result if you didn't have thisexemption?

Mr. EwI(. I think my answer has to be twofold.One, we haven't attempted to go out and build a different model and

analyze its competitive costs or economic costs in any form, but,second, we have taken a look at the Copyright Office's version of this,which is substantially different, because it does not give to private-.

Mr. DAiEmLSON. Would the gentleman speak up a little, please ? It ishard to hear.

Mr. EwINo. I am sorry.36-510-78---12

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We have examined the Copyright Office's version, which is sub-stantially different, because it does not contemplate private entitiesbeing able, free of the antitrust laws, to agree on both collectionmatters and distribution matters, but rather relies on the CopyrightTribunal to do much of the work.

We have fewer antitrust problems with that portion of the Copy-right Office's bill than we do with the present draft of IL.R. 6063.I am not yet prepared this morning to say that we find that otheralternative satisfactory to us, but we have at least answered yourquestion, Mr. Chairman. We have examined that as an alternative.

Mr. KASTENMEIER. Let me yield to the gentleman from California.Thank you.Mr. DA.XIELSON. Thank you, Mr. Chairman, and I thank you, sir,

for your contribution.I have read your statement, and the portion you read as a fairly

long answer to my chairman's question was not in it, though I amglad it is now in the record so we can study it.

I would like to make just a couple of comments.First, I recognize that )'our basic position here is that you do not

favor the bill because of the exeml)tion from the antitrust laws. Thatgoes back to your letter to Senator Eastland in October of 1975, theposition which you still maintain. I am going to make first of all arequest, and that is that you have, if you have, or can devise, someconstructive, helpful suggestions or criticisms which would enableus to meet the problem which is before us for solution.

I invite them and would welcome them, because it is no desire ofmine, and I am sure not that of the committee, to report legislationwhich is either defective or which doesn't meet as closely as possil)]ethe requirements of the antitrust laws and all other laws that wehave in the count r. So if you can hell) in that regard, I I)ersonallyrequest it, and invite it. That may be of some help to us.

Would you care to respond to that ?Mr. Ewixo.\-,. Yes. sir. Mr. Danielson.Let me respond by going back to your very first comment. I want

to make it very clear on this record that the Department of Justice(loes not Opl)ose this bill as such. We only oppose the grant ofantitrust immunity.

Mr. I).\ XILSO.x. Yes; that was all I meant in that statement.Mr. Evixc,. Yes, sir.Mr. J)..wrmiso-x. I am looking at the top of page 4 of your written

statement, and that is where that language is set forth.Mr. EwixNo. Second, Mr. Danielson, we are-of the opinion that

you could in fact create and have the same system that you wantto create here. without giving the players in that game' antitrustimmunity and still meet the objectives that you have.

Mr. DANIEILSON. Fine.Now if you could come ul) with that kind of suggestion, I am

satisfied that not only will I appreciate it. but I have a feeling thatthe entire committee would appreciate it. We have no desire ofcreating any more. problems than we have to in this type of legislation.

Aq to antitrust. I would like to make one thing clear. I am a supporterof the antitrust laws. I think they have been veryj beneficial to our

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economy and to our country, but, there, is nothing sacred about them.They are a creature of the Congress, and to the. extent. that Congresscreated them, Congress call modifv them or make exeml)tions to them.They have no life of their own. They have a life which has been grantedto them. I won't. get biblical now, but I think you follow.

I would like to rewind you of your statement that there were abuseswith the ASCAP and BMI and SESAC situation some 15 or 20 yearsago but they were corrected. I respectfully submit that if abuses should-develop un(ler this law, if it, should become a law, there. is no reasonwhy they cannot be corrected. I certainly would assist in correctingthem if fit should becoiIe necessary or desirable to do it.

I depart from you in two respects.One is your comment that there is-no way that an individual per-

former ca'n present an individual claim under the framework of thisproposed legislation. It is true that it. woul(l be very difficult for himto do so, but it is also true, and has been demonstrated by history, thatthe individual performer today has no recourse whatsoever, none atall. and to the. extent that. we can remedy that, at least to a little bit,we have improved the situation.

There is no instance today where the individual performer has anyrecourse at all. Under this bill ie would have some recourse, so thatwould be a step forward.

I do hope that you can give us some assistance here. We don't wantto run countercurrent to the antitrust laws, at least. no farther than wehave to. I do reo glize though a problem that you nmust bear in mind.

The ordinary rules of competition are not an effective remedy toprotect, the property right of an individual performers in a field ofmusic, and in a situation that prevails in this countr-y. With 2'20 millioncitizens, heaven knows how many performers, the individual pro)al)Iyhas so littlkh at stake that many courts would say lie doesn't even havestanding to sue. lie doesn't have a sufficient amount to make it a justi-ciable controversy. I think you have to provide a remedy if that isa problem. That is what we are trying to do here.

Again we invite and would greatly appreciate constructive sugges-tions you have of a constructive nature.

Mr. h,.\STE EII.- This concludes our hearing.I would say. Mr. Ewing, I would echo the sentiments of the gentle-

man from California. If and as the more definitive models are devel-oped of distributionn. collection, distribution and allocation, we willcertainly want to check them out. with you and get your comment fromyour special perspective. We appreciate your testimony here thismorning.

Mr. Ewixc,. Thank von, Mr. Chairinan.Mr. KA.STFNMENrE. That concludes today's hearing.The subcommittee will meet on the same subject tomorrow at 10

o'clock in time morning in this rooni, 2226. Until that time the commit-tee stands adjourned.

[W~hereupon at 12:50 p.m., the subcommittee was adjourned, toreconvene at 10 a.n., Thu rsday, May 25, 1978.]

PERFORMANCE RIGHTS IN SOUND RECORDINGS

MAY 25, 1978

HOUSE OF REPRESENTATIVES,SUBCOMMI ITiEE ON COURTS, CIVIL LIBERTIES,

AND THE ADMINISTRATION OF JUSTICE,OF TIE COMMITTEE ON THE JUDICIARY,

Washington, D.C.The subcommittee met, pursuant to notice, at 10:20 a.m., in room

2226, Rayburn House Office Building, the Honorable Robert W. Kas-tenmeier (chairman of the subcommittee) presiding.

Present: Representatives Kastenmeier, Drinan, and Ertel.Also present: Bruce A. Lehman, counsel, and Thomas E. Mooney,

associate counsel.Mr. KASTENMEIEr. The subcommittee will come to order.This morning the subcommittee will conclude its hearings on H.R.

6063, legislation creating performance rights in sound recordings.We will receive testimony from two agencies of Government with

an interest in the issue, the National Endowment for the Arts and theDepartment of Commerce.

The Department of Labor, which was scheduled to present testi-mony, has indicated recently a preference to submit a written state-ment, which will be received for the record.

Our first witness this morning is one of our Government's highestranking officials whose duty relates solely to the encouragement of thearts.

I am very. pleased to greet the Honorable Livingston Biddle, Chair-man of the National Endowment for the Arts.

It is a pleasure to welcome you, sir.

TESTIMONY OF HON. LIVINGSTON L. BIDDLE, JR., CHAIRMAN, NA-TIONAL ENDOWMENT FOR THE ARTS, ACCOMPANIED BY ROBERTWADE, GENERAL COUNSEL, NATIONAL ENDOWMENT FOR THEARTS

Mr. BIDDLE. Thank you, Mr. Chairman.I have brought with me, with your approval, our counsel, Mr.

Robert Wade.Mr. KASTENMETER. Mr. Wade.Mr. BMDDLE. I consider Mr. Wade to be one of the eomntry's leading

experts in this area, and someone who has assisted me a great deal.I am delighted to be with you.As you know, for many years I worked in the other body as a

special assistant and subcommittee director for Senator Pell, and since(169)

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that time I have become somewhat upwardly mobile and so it's alwaysa great delight for me to be back in the House or Senate.

I am very happy to provide this morning, Mr. Chairman and mem-bers of the committee, with our views, the views of the National En-dowment for the Arts on H.R. 6063, a bill to amend the general revi-sion of copyright law by establishing performance royalty rights insound recordings for performing artists and record producers.

Mr. Chairman, the National Foundation on the Arts and theHumanities Act of 1965, as amended, the law creating the NationalEndowment for the Arts, contains an eloquent declaration of purpose.

In part, that declaration states:. . . It Is necessary and appropriate for the Federal Government to help create

and sustain not only a climate of encouraging freedom of thought, imagination,and inquiry but also the material conditions facilitating the release of thiscreative talent;

We-believe the proposed legislation, if enacted, would go a longway toward helping to create adequate material conditions for per-forming artists and record producers.

I am, of course, speaking of the commercial use of the talent andskills of performing artists and record companies whose creativeefforts bring to life and preserve in sound recordings a song, a sonata,or a symphony.

The primary users of these recordings--that is, radio and televisionbroadcasters, jukebox owners, background music companies, andothers--as we all know, freely utilize these efforts to their commercialbenefit.

Indeed, it can safely be said that without the performance creationsof musicians, performing artists, and record makers, the broadcast andjukebox industries would not exist as we know them today.

The proposed legislation has been the subject of a great deal ofdiscussion over the past few years. The Congress has been fully in-formed as to the merits of the proposals and has, as well, heard somevoices in opposition.

As you know, the National Endowment has joined those who sup-port this copyright revision. Rather than go through all of the numer-ous arguments that have been set forth in support of this bill, andwith which we are in agreement, I would prefer to enumerate here someof those that seem most persuasive to the National Endowment forthe Arts.

(1) The Copyright Office of the Library of Congress supports theprinciple of copyright protection for the public performance of soundrecordings, finding that sound recordings are a proper subject forcopyright protection under the Constitution and laws of the UnitedStates.

The Register of Copyrights has recommended in her report to theCongress of January 3, 1978, that legislation be enacted to createpul)lic performance rights with respect to sound recordings. A draftbill was included in that report which was essentially a revision ormodification or technical clarification of the bill introduced by Con-gressman Danielson, II.R. 6063, presently under discussion at thesehearings.

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And I might add, as I am sure you are aware, that the Register ofCopyrights, Barbara Ringer, was directed by Congress to do thatstudy.

(2) A second persuasive argument for us is the fact the composers,songwriters, and publishers, all of whom similarly enjoy copyrightprotection tender our laws, receive performance royalties.

(3) Many nations, in fact, 51 all together around the world nowrecognize by law performance rights for performers or recordinakers,or both, including the United Kingdom, West Germany, Japan, Italy,Sweden, Mexico, Spain, and Israel, to name but a few.

(4) An International Convention for the Protection of Performers,Producers of Phonograms and Broadcasting Organizations was adopt-ed in 1961. Phonograin means record, sometimes it's referred to as aphono record, and this convention, known as the Rome Convention,stated in article 12:

If a phonogram published for commercial purposes, or a reproduction of suchphonogram is used directly for broadcasting or for any communication to thepublic, a single equitable remuneration shall be paid by the user to the perform-ers, or to the producers of the phonogram, or to both.

So far the convention has been ratified by 15 countries, including theUnited Kingdom, West Germany, Austria, Denmark, and Sweden.We agree with the Register of Copyrights that this international in-strunent was years ahead of its tine and that it has much to offerto the United states and this country's creative citizens.

Enactment of the proposed legislation would bring copyright pro-tection in this country into conformity with that of the conventionand thus the laws of those nations which have thus far ratified theconvention.

(5) Independent studies have shown that no undue hardship, webelieve, would be imposed on those industries affected, since the rela-tively all, in terms of advertising and user revenue, additional costsof performance royalties probably would be passed on to the ultimateeconomic beneficiaries of the commercial use of sound recordings, forexample, advertisers, jukebox users, background music users, etcetera.

Further, it is our understanding that such studies have shown thatincreased costs to the advertisers and other commercial users of soundrecordings would be minimal. Numerous other observations have beenset forth in the study concerning the benefits to broadcasters stemmingfrom the uncompensated use of sound recordings. We are in agreementwith such observations.

It is true that details of implementation have yet to be completelyworked out by the various groups involved in the support of thisle-islation. Wlile most such details are not a proper subject of concernfor the National Endowment for the Arts, I would like to make one ortwo comments in this regard.

First, it is my understanding that the record industry and the per-forming artists' unions are in agoTeement with the principle that allperformers on a given record would share equally in the distributionof royalties derived therefrom. That is, there would be an equal dis-tribution of fees between a solo performer and his or her supportingmusicians. We heartily endorse that principle.

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Second, Mr. Chairman, we would favor an implementation approachwhich would insure substantial benefits to performing artists involvedin the creation of artistic works falling outside the commercially suc-cessful category, for example, the category of popular "hits".

In other words, the National Endowment for the Arts would favora distribution formula weighted in favor of symphonic, folk, operatic,or other musicians involved in the creation of artistic works which areworthy in themselves, but which by their nature do not have, at thistime at least, the ability to generate mass sales.

This is particularly important in view of the severe economic strainpresently being felt by symphony orchestras, opera companies, andnonprofit arts groups across the country.

I might add that there has been some concern recently with respectto a decline in recordings of symphonic, operatic and folk music. Webelieve that this bill could serve to encourage more activity in thisdirection. We believe that the opportunity to receive performanceroyalties will encourage musicians through their representative asso-ciations to seek ways in which there can be more recording in these artforms.

In this connection, there is one important difference between theCopyright Officer's draft bill and H.R. 6063 concerning the distribu-tion of royalties.

The Danielson bill provides for a mandatory 50/50 split of royaltyproceeds between performers and "copyright owners," record com-panies. The Register of Copyright has pointed out that the bill doesnot come to grips with the status of performers who are employees forhire.

The Register's draft bill gives at least 50 percent of the royaltiesto performers on a per capita basis, regardless of their employmentstatus, but allows performers to negotiate for more, not less, than a 50percent share. We concur with that recommendation.

Also, where other differences may exist between the two bills, theNational Endowment would associate itself with the views and rec-ommendations of the Copyright Office.

Finally, Mr. Chairman, we are most pleased that members of theRecording Industry Association have agreed to a provision in this leg-islation which would allocate at least 5 percent of any performanceroyalty income received by them to the National Endowment for theArts to be used for purposes consistent with the Endowment's enablinglegislation.

The industry's attitude in this regard is most encouraging, as itdemonstrates, we believe, a beneficial kind of partnership betweenprivate industry and the Endowment's work being used for example,in this case, for the support of classical, folk. poetry, narrative, orother noncommercial recording projects. or perhaps for providing ad-vance training opportunities for musicians wishing to further theircareers.

In conclusion, Mr. Chairman, we heartily endorse the view thatartists. musicians. and record companies who contribute their creativeefforts to the production of copyrighted sound records should reason-ablv share in the income enjoyed by radio stations and other commer-cial organizations who use the recordings for profit.

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This legislation would be an important step toward achieving oneof the Endowment's major goals, to encourage and sustain develop-ment of creative American talent by helping to insure that Americanartists will receive a just financial return for their creative work.

That concludes my statement, Mr. Chairman.fr. KASTEmNmIER. Thank you very much, Mr. Biddle, for an inter-

esting statement.The provision which would allocate at least 5 percent of the per-formance royalty to the National Endowment for the Arts, that is not

presently-Mr. BIDDLE. That is correct.Mr. KASTEN1EIER [continuing]. A part of either bill, either the

draft bill or the Danielson bill?Mr. BIDDLE. That is correct.Mr. KASTEN..%IEIFR. May I inquire how recently this was agreed upon

and negotiated?Mr. BIDDLE. I think this goes back at least a year and one half, Mr.

Chairman. I will defer to SLr. Wade on the exact time of an agree-ment in that respect.

Mr. WADE. Yes, Mr. Chairman. This does go back to the earlier con-versation the Endowment had entered into with the representativesof the Musicians Union and the recording industry, prior to the timethat the Endowment had adopted any official position.

The recording industry at that timne raised the possibility that theywould be willing to agree to such a provision, which would allocatesome of the royalties they had received to the National Endowment, ifit were consistent with our legislation and, at that time, we indicatedto them that, given our special gift authority, that is, our authority toreceive gifts (monetary or property) in support of our legislativemandate, that we would not feel that would be inappropriate.

I believe Mr. Gortikoy, the president of the Record Industry So-ciety, recently has also indicated that the members of the recordingindustry association are agreeable to that kind of approach.

Mr. KASTENMETER. However, am I not. correct in assuming from thestatement, Mr. Wade, that -ou were prepared to deliver earlier thatvou would like to hold out for 10 percent?. Mr. WADE. I will confess to a little personal greed perhaps on thatpoint. I would like to see us. of course, be able to use such proceeds forthe purposes that Mr. Biddle alluded to. I think they are very goodand worthy purposes.

Mr. KASTENMEIER. Presumably you are talking about possibly 5 per-cent up to 10 percent, and then it depends, I suppose, as far as the re-cording indu-stry. whether, in fact, they get 50 percent or somethingless than 50 percent by contract, so there would be some variables in-volved here, I take it and, plus the fact, I assume, not all records man-ufactured, I may be wrong, certainly not foreign records necessarilywould be maMfactured or published by members of the Record Indus-try Association of America. There may be some outside.

Mr. WADE. Yes. We understand this is not binding on every recordcompany in the country but that they do have a consensus that this isagreeable to the industry generally.

Mr. KASTENMEI R. You deal somewhat with the question of a distri-bution formula, and while I think you would destroy any intention to

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suggest or impose a formula on the unions or on the performers, none-theless that is a problem we will have, and while you indicate a prefer-ence for distribution formula weighted in favor of symphonic, folk,operatic, or other musicians involving creation of artistic works, howcan that really be achieved quite apart from the humanities, quiteapart from the National Endowment being involved, aside from that?

Mr. BIDDM. My own feeling there, Mr. Chairman, is that that kindof a formula would have to be worked out very carefully with thoseinvolved, and it would be in their discretion to devise that formula.

What we are just saying is that here those major hit records whichdo return large sums of money to the individuals and others involvedshould be weighted in less favor than those than relate to other typesof music that would have less than mass appeal.

I think perhaps one factor here would be the number of sales in-volved in the record, but we would be happy to do a little soul search-ing on that and come back to you on more specific ideas.

Mr. KAs8mT n-.IPER. Fine. We appreciate that, because I think theremay be an inconsistency. Certainly the advocates yesterday in thecolloquy refertuced to a principle which you re-express here, that is,all shall participate and shall participate equally, and I am talkingabout musicians on a given record.

In the colloquy that ensued it was suggested that there was noway of measuring excellence or merit or other preferences, and thatwhen you take an equal or all type of simple formula, you reallyeschew the notion of being able to make distribution on some othergrounds.

Mr. BIDDLE. Yes. I see that clearly and I do agree, as we have saidin the statement, that the team that produces the end result has tobe equally treated, and that is the individual performer, whether lie bethe first violinist or the timpani person that simply plays a note or twoduring a given performance should receive equal treatment. But wewill try and suggest some ways in which a weighing could beappropriate.

Mr. WANDE. If I might add, Mr. Chairman, thaqt this might reflectsome concern with the advance of technology relating to media pres-entations of recorded music. There may be a greater adverse effecton the classical area. For example, you cannot put symphonies ontelevision 3 or 4 hours a day or operatic-type works. By their nature,as they say, they are heavier and require more concentration.

The advent of technology and the use of the media in presentationof these works could adveisely'affect symphonic, operatic. or otherclassical performance audiences perhaps more than the audiences forthe type of music that generates by its nature more of a mass audienceover a more regular period of time.

But as Mr. Middle has said. a formula will not be easy to workout, and there is a lot of work to be done by the parties who getdown to the nitty-gritty on this.

Mr. KASTENM3ETER. In looking at this legislation from the conceptualstandpoint in terms of scope, after all, perhaps she was only arguingconstitutional grounds. but the Register yesterday said it should notbe based on need but rather on principle.

The question was asked if the principle, if it is a principle, andcertainly you would be another witness who ought to have an opinion

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then, in fact., wherever a performer's work, where fixed as a tangiblemedium of expression, whether it be a sound recording or not, then theyought to be entitled similarly to a copyright. This would theoreticallyapply to the motion picture actor in a film or in a television play, aswell as many other performers one must conceive of.

How do you feel about the theoretical coverage of other creativeperformers, quite apart from sound recordings?

Mr. BIDDLE. I had not really thought about the expansion of thisprinciple, but merely the relationship to the area that we are con-cerned with here where we have already recognized that composersand arrangers and publishers have the rights that a'e already pre-scribed by law, and then performers and record producers now have,should have a similar right. I think that is an equitable kind ofsolution here in principle as well as in fairness and in the needsof the artists.

I -Would have to reflect, I guess, Mr. Chairman, on a broader inter-pretation of that.

Mr. KASrENMEIER. Because the National Endowment for the Arts,I take it, is interested in other artistic forms of expression besidesmusic.

Mr. BIDDLE. Oh, indeed so and, indeed, in all of the ats, and in awide variety of the aits, and we have addressed ourselves to otherkinds of legislation over the past years and most that deal with otheraspects of the fair treatment of visual artists, for example, performingartists.

In our legislation there is a clear mandate that any professionalperformer or related or supporting professional I)ersonnel must bepaid at the prevailing wage in the area, and our grantees all have togive us that assurance before receiving Federal funds. So that is an-other area where an equitable kind of principle is involved.

But if we are talking about a copyright for a motion picture actoror in an area of that kind, I would have to think a bit about amplifi-cation. I would not want to expand beyond what I have said today.

Mr. KASTENMEIER. I suggest to you the principle is the same, andthat while there may not be say a need or a political. any impetus toaccomplish that, nonetheless, f think it could not be resisted on thebasis that it's not the same principle.

Mr. BIDDLE. No, I would say the principle is a very strong one, andcertainly a motion picture actor who contributes his or her talentsto a film is doing very much the same thing as a musician who con-tributes to the individuality of a given performance that is recorded.

Mr. KASTENmEIER. Thank you.I yield to the gentleman from Massachusetts.Mr. DRINA. Thank you, Mr. Chaii man, and thank you, Mfr. Biddle

and Mr. Wade.Every day I get a new insight into-this matter. Everyone keeps

saying that the costs will be. minimal and, if that is so, then why areso many perturbed about this? Apparently the broadcaster. feel thisis the foot in the door.

Would you have any comment. on what the hysteria, is about at arather high level from one group of people ? Why are they so fearful ?

Mr. BIDILE. ( 1on gressnan, I have studied this legislation. and Istudied it earlier in a slightly different version when I was working

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for the Senate subcommittee, and it seems to us, after reviewing thisas carefully as we can, that the provisions that are contained on page4 of my draft bill, which (leals with the distribution and the amountsrequired by the different broadcast stations, if a station's gross rev-enues are between $25,000 and $100,000-

Mr. DRINAN. I am familiar with that, and why are they so upsetabout the whole thing?

Mr. BIDDLE. We cannot judge their concerns, but our feeling is thatthis is a very small amount. One thing that I might contribute here,you may have heard already, is that those stations whose. gross re-ceipts are between $25,000 and $200.000 are, according to the infor-martion I have, 65 percent of the stations that are involved. So it seemsto us a modest sum.

Mr. DRINA,. It may be they have nothing else at the moment tobe concerned about. Bt the. international dimensions of this are veryintriguing and, in the paper that is to be given after your good testi-imony by Ms. Louise Wiener of the Commerce Department, it is veryintrigue ing in that it tells that American performers and producersright now receive foreign royalties to the tune of $13 million per year,and that 50 foreign nations have established a right to royalties forperformers and record producers.

If we did, in fact, enact this legislation and if then we would beable to join the Rome Convention, would we be giving and receivingrather substantial sums in performance royalties to foreign people?

Mr. BIDDL.E. To foreign people? I don't have the answer to that,Congressman. I know that is a factor here. Maybe Mr. Wade has acomment on that.

Mr. WADE. I don't believe I have the answer either. But it wouldseem to me that the conclusion or the answer to that question would bea function of the marketplace, so to speak. There is a competitive

-tor here between cultural institutions and between nations, if

you will.What the net result would be as to how many foreign musicians as

opposed to Americans-Mr. DRINAN. 1et me just quote from the subsequent testimony be-

cause this shows the depths of the problem and how American artistsare being affected.

It Is estimated that American performers and record producers would re-ceive a royalty Income from foreign sources equal to if not greater than thatwhich they would receive In royalties from American sources.

So the estimate I have is for openers they would receive $13 mil-lion from all of the radio and television broadcasters of America andthey would receive that or more if, in fact, we joined these 50 nations,and implemented the right that artists in America have to a royaltywhen their performance is audited overseas.

Mr. WADE. I would say that sounds reasonable, because when youlook at the situation in terms of cultural institutions, American sym-phony orchestras, and American dance groups are in great demand.

Mr:. DRINAN. The real intriguing question in the bottom of my mindis. 'Will you get 5 percent of the foreign royalties?

Mr. WADE. We wouldn't.Mr. D .INAN. Why not?

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Mr. WADE. Sorry, I misunderstood you.Mr. DRINAN. The endowment would get 5 percent from the Rec-

ording Industry Association, but who will receive the foreign royal-ties? Wouldn't the Recording Industry Association, and wouldn'tthey give you the 5 percent?

Mr. WADE. It would fit in with it, yes. We had not really reflectedon that, but since you mention it-

Mr. DRINAN. Would you like to hire me as your assistant generalcounsel ?

IfMr. BIDDLE. Any day, Congresssman.Mr. WADE. Any time.Mr. DRINAN. You have added a dimension, as I say, and I have

found it very, very helpful.Mr. VADE. I just didn't want to sound too greedy.Mr. DRINAN. Thank you very much.Mr. KASTENMEIER. The committee is indebted to you both, fr.

Wade and certainly you, Mr. Biddle, as Chairman of the NationalEndowment for the Arts for coming here today and helping edify uson this piece of legislation that is pending in Congress.

WVe appreciate your appearance.Mr. BIDDLE. Thank you, Mr. Chairman, and I do greatly appreciate

the privilege and honor to be here. I think this is an immensely im-portant subect, and I am delighted you invited us. -

Thank you.Mr. WADE. Thank you.[The prepared statement of Mr. Middle follows:]

STATEMENT OF LIVINGSTON L. BIDDIE. JR., CHAIRMAN, NATIONALENDOWMENT FOR TIHE ARTS

It is a pleasure to be here this morning to provide you with the views of theNational Endowment for the Arts on H.R. 6063, a bill to amend the General Re-vision of Copyright Law by establishing performance royalty rights in soundrecordings for performing artists and record producers.

Mr. Chairman, the National Foundation on the Arts and the Humanities Actof 1965, as amended, the law creating the National Endowment for the Arts, con-tains an eloquent Declaration of Purpose. In part, that Declaration states:

" . . it is necessary and appropriate for the Federal Government to helpcreate and sustain not only a climate of encouraging freedom of thought, imagi-nation, and inquiry but also the material conditions facilitating the release of thiscreative talent;" (emphasis added)

We believe the proposed legislation, if enacted, would go a long way towardhelping to create adequate material conditions for performing artists and to-ward correcting the present inequitable situation with regard to the commercialexploitation of the creative work of performing artists and record producers.I am, of course, speaking of the commercial use of the talent and skills of per-forming artists and record companies whose creative efforts bring to life andpreserve in sound recordings a song, a sonata or a symphony. The primary usersof these recordings, i.e., radio and television broadcasters, jukebox owners,background music companies, et al., as we all know, freely utilize these effortsto their commercial benefit. Indeed, it can safely be said that without the per-formance creations of musicians, performing artists, and record makerse--broadcast and jukebox industries would not exist as we know them today.

The proposed legislation has been the subject of a great deal of discussionover the past few years. The Congress has been fully informed as to the meritsof the proopsals, and has, as well, heard some voices in opposition. As you know,the National Endowment has joined those who support this copyright revision.Rather than go through all of the numerous arguments that have been set forth

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in support of this bill, and with which we are in agreement, I would prefer toenumerate here some of those that seem most persuasive to the National Endow.ment for the Arts.

(1) The Copyright Office of the Library of Congress supports the principle ofcopyright protection for the public performance of sound recordings, finding thatsound recordings are a proper subject for copyright protection under the Constitu-tion and laws of the United States. The Register of Copyrights has recommendedin her report to the Congress of January 3, 1978, that legislation be enacted tocreate public performance rights with respect to sound recordings. A draft billwas included in that report which was essentially a revision of the Danielsonbill (H.R. 6063) presently under discussion at these hearlugs.

(2) Composers, song writers, and publishers, all of whom similarly enjoy copy-right protection under our laws, receive performance royalties.

(3) Many nations around the world now recognize by law performance rights-for performers or record makers, or both, including the United Kingdom, WestGermany, Japan, Italy, Sweden, Mexico. Spain, and Israel. to name but a few.

(4) An International Convention for the Protection of Performers, Producersof Phonograms and Broadcasting Organizations was adopted in 1961. This con-vention, known as the Rome Convention, stated in Article 12:

"If a phonogram published for commercial purposes, or a reproduction of suchphonogram is used directly for broadcasting or for any communication to thepublic, a single equitable remuneration shall be paid by the user to the performers,or to the producers of the phonogram, or to both."

So far the convention has been ratified by fifteen countries, including theUnited Kingdom, West Germany, Austria, Denmark, and Sweden. We agree withthe Register of Copyrights that this international instrument was years aheadof its time and that it has much to offer to the United States and this country'screative citizens. Enactment of the proposed legislation would bring copyrightprotection In this country Into conformity with that of the convention and thusthe laws of those nations which have thus far ratified the convention.

(5) Independent studies have shown that no undue hardship would be Imposedon those industries affected, since the relatively small (in terms of advertisingand user revenue) additional costs of performance royalties probably would bepassed on to the ultimate economic beneficiaries of the commercial use of soundrecordings, i.e., advertisers, jukebox users, background music users, et al. Fur-ther, it is our understanding that such studies have shown that increased costs tothe advertisers and other commercial users of sound recordings would be minimal.

Numerous other observations have been set forth concerning the benefits tobroadcasters stemming from the uncompensated use of sound recordings. We arein agreement with such observations.

It is true that details of implementation have yet to le completely worked outby the various groups involved in the support of this legislation. While mostsuch details are not a proper subject of concern for the National Endowment forthe Arts. I would like to make one or two comments in this regard. -

First, it is my understanding that the record Industry and the performingartists' unions are in agreement with the principle that all performers on agiven record would share equally in the distribution of royalties derived there-from. That Is, there would be an equal distribution of fees between a solo per-former and his or he? supporting musicians. We heartily endorse that principle.

Second. Mr. Chairman, we would favor an implementation approach whichwould insure substantial benefits to performing artists involved in the creation ofan artistic works falling outside the commercially successfully category, i.e., thecategory of popular "hits". In other words, the National Endowment for the Artswould favor a distribution formula weighted in favor of symphonic, folk,operatic, or other musicians involved in the creation of artistic works which areworthy in themselves, but which by their nature do not have. at this time at least.the ability to generate mass sales. This is particularly important in view of thesevere economic strain presently being felt by symphony orchestras, opera com-panies, and non-profit arts groups across the country. I might add that there hasbeen some concern recently with respect to a decline In recordings of symphonic,operatic and folk music. We believe that this bill could serve to encourage moreactivity in this direction. We believe that the opportunity to receive performanceroyalties will encourage musicians through their representative associations toseek ways in which there can be more recording in these art forms.

In this connection, there is one important difference between the CopyrightOffice's draft bill o'nd H.R. 60e3 concerning the distribution of royalties. The

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Danielson bill provides for a mandatory 50/50 split of royalty proceeds betweenperformers and "copyright owners" (record companies). The Register of Copy-right has pointed out that the bill does not come to grips with the status of per-formers who are employees for hire. The Register's draft bill gives at least50 percent of the royalties to performers on a per capita basis, regardless of theiremployment status, but allows performers to negotiate for more (not less) thana 50 percent share. We concur with that recommendation.

Also, where other differences may exist between the two bills, the NationalEndowment would associate itself with the views and recommendations of theCopyright Office.

Finally, Mr. Chairman, we are most pleased that members of the RecordingIndustry Association have agreed to a provision in this legislation which wouldallocate at least 5% of any performance royalty income received by them to theNational Endowment for the Arts to be used for purposes consistent with theEndowment's enabling legislation. The Industry's attitude in this regard is mostencouraging, as it demonstrates a beneficial kind of partnership between privateindustry and the Endowment's work being used for example, in this case, forthe support of classical, folk, poetry, narrative, or other noncommercial record-ing projects, or perhaps for l)roviding advance training opportunities for musi-claims wishing to further their careers.

In conclusion, Mr. Chairman, we heartily endorse the view that artists, musi-vian., and record companies who contribute their creative efforts to the produc-tion of copyrighted sound recordings shiouh( reasonably share in the incomeenjoyed by radio stations and other commercial organizations who use the re-cordings for profit. This legislation would he an important step toward achievingone of the Endowment's major goals: to encourage and sustain development ofcreative American talent by helping to insure that American artists will receivea just financial return for their creative work.

Mr1. K.AS'rENxM1IEr Next the Clmir would like, to call Ms. LouiseWiener, Special Assistant to the Secretary of ('omierce for CulturalResou rces.

WVe are very pleased to have yon here today.

TESTIMONY OF LOUISE WIENER, SPECIAL ASSISTANT TO THE SEC-RETARY OF COMMERCE FOR CULTURAL RESOURCES

3fs. W ThaR. Tlink you. sir. It is ,I. l)leastire to be-heire.Mr. (mir-nan and members of the subcommittee, I am Louise W.

Wienei-, Special Assistant to the Secretary of Commerce for Cul-tuiral Resources.

I appreciate this opportunity to testify before you for the Secre-tary on II.R. 6063, the Perfornance Rights Amendment of 1977.

As vou are well -aware, the Register of Copyrights, in response toher congresIional mandate in section 114(d) of the General Revisionof Copyright Law, Public Law No. 94-553, has prepared and re-h ased il-n'exhaustive reportt on pul)lic performance rights withrespect to sounl recordings.

I, as a spokesperson for the )epartment of Commerce, applaud theRe.is teir's effort and concur with the position and legislative recom-lendations set folh in her report. In an addendum to that report,

the Register has proposed a draft bill embodying those recommenda-tions, entitled:

To amend the copyright law. title 17 of the United States Code, to create pub-lic performance rights with respect to sound recordings, and for other purposes.

That draft bill, to be cited as "The Sound Recording PerformanceRights Amendment of 1978," is essentially a revision of H.R. 6063,fondly known as the Danielson bill.

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Briefly, the Register's draft bill would provide performance rights,subject to compulsory licensing, in copyrighted sound recordings, andwould extend the benefits of those rights both to performers, includingemployees for hire, and record producers as authors of soundrecordings.

The Department supports the Register's draft bill and urges itsenactment.

I would like to offer some general comments as to why we feel thecopyright law should be amended to provide public performancerights with respect to sound recordings and as to why we support theRegister's draft bill:

1. American music composers and publishers, based on exclusiverights under U.S. copyright law, receive compensation for the publicperformance of their works in the United States.

Music composers and publishers from foreign nations which aresignatories of the Universal Copyright Convention also receive com-pensation when their works are performed in the United States. Like-wise, since this country is a signatory to that convention, Americanmusic composers and publishers receive royalties from signatory for-eign countries for the performance of their works in those countries.American performers and record producers, however, are denied thisform of compensation both here and abroad.

2. More than 50 foreign nations have established a right to royaltiesfor their performers and record producers with respect to the publicperformance of sound recordings to which those performers and pro-ducers have contributed.

Under the International Convention for the Protection of Per-formers. Producers of Phonograms, and Broadcasting Organizations,referred to as the Rome Convention of 1961, a scheme of reciprocityexists amongst signatory foreign nations. Since our laws do not pro-vide performance rights in this country for any performer or recordproducer regardless of nationality and since we have not signed theconvention, American performers and record producers are generallydenied compensation abroad.

As a matter of public policy, American and reciprocating foreignperformers and record producers should be granted performanceroyalty rights in the United States. Such a grant would be equitableconsidering that composers and publishers already have such a right.American industry and labor should not be denied this form of incomeeither on a national or an international basis.

It is estimated that American performers and record producerswould receive a royalty income from foreign sources equal to if notgreater than that which they would receive in royalties from Ameri-can sources. Presently, they receive little such income from foreignsources because, as stated earlier, we do not grant performance royaltyrights to foreign performers and producers, let alone to our own.

It is estimated that if we were to create a right to royalties forour own performers and producers and if we were to make that rightreciprocal by signing the Rome Convention, foreign royalties to Ameri-can performers and producers would be of the same magnitude as for-eign royalties to American composers and publishers. In 1976 thatamounted to over $13 million through ASCAP alone.

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While creation of a right to performance royalties could hardlybe cast as a solution to our balance-of-payments problems, neithershould it be dismissed out of hand.

It is important that any performance royalty legislation be in har-mony with the Rome Convention of 1961 to insure that American per-formers and music producers will receive an appropriate income fromthe foreign market. Both H.R. 6063 and the Register's proposal wouldappear to be in harmony with that convention.

3. Effective resolution of this issue opens an avenue for future wagenegotiations within the music industry. Currently this industry suffersfrom intense pressure from labor for increased wages to keep pace withthe cost of living, and pressure on the industry side to keep prices downso that public access to recordings is as wide as possible.

The introduction of performance royalties offers a safety valve todiffuse the pressures of these opposing economic forces. The draft billof the Register of Copyrights would allow for future flexibility whenand if that is in accord with the best interest of both the unions andthe industry.

4. The proposed method of additional payment as proposed by theRegister and by H.R. 6063 provides an incentive for superior perform-ance and further reflects a level of respect and recognition for thecontributions of performers, both artistic and economic, which is longoverdue.

We have carefully reviewed the statements of the broadcasting in-dustry and respect their concerns. However, we wre not persuadedby their arguments in this instance.

The costs to them would be minimal and fees to them are formulatedto take into consideration the economic dimensions of individualstations.

At the point at which projected costs do become burdensome, it isprobable that they wd'uld be broadly shared with the advertisers; thatis, the general business community and the public at large. This wouldso diffuse and mute the economic impact on any individual constituencyas to be insignificant.

The broadcasters note that they rely on recording for approximately75 percent of their programing. Therefore, in the long range, it isprobably in their own best interests to do all they can to promote ahealthy and creative recording industry.

In conclusion, we fully support amending the copyright law to pro-vide performance rights in sound recordings. We believe that thelong-range economic interests of all parties would be best addressedthrough the activation of performance royalties in America in concertwith the Rome Convention of 1961.

We cannot continue to economically penalize musicians for theirchoice of profession and expect to attract the creative talent whichprovides a lifeline both to the recording and the broadcasting indus-tries.

We believe the Register of Copyrights has drafted a bill based onexhaustive independent study which will provide a sound legislativebasis for such a performance rights system, a system which wouldcontain flexibility for the future.

36-510--78--13

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Accordingly, we urge enactment of the Danielson bill as it would berevised by the Register's proposal.

Mr. KASTENM1EIER. Thank you very much, Ms. Wiener, for yourhelpful testimony.

On page 5 you say that broadcasters ought to do all they can topromote a healthy and creative recording industry.

Isn't the recording industry today healthy and creative?Ms. WIENER. Yes; it is, but I think it is important that we continue

to insure that both the recording industry and the broadcasting indus-try remain that way. We must look back at who is feeding that systemand providing its creativity and see that they survive in an economicenvironment conducive to continued creativity and health.

Mr. KASTENIEIER. Onl page 4 you say the I)roposed method of addi-tional payment as proposed by the Register in H.R. 6063 provides anincentive for superior performance. How does it do that?

1s. W IEN,ER. I think that, if you provide an economic incentive toall whacontribute to a recording, it becomes increasingly in their ownbest interest to see that that is the best possible recording made.

Mr. ,%srr.NimEMEiR. As I say, the bill is not based on the premisethat it will reward excellence, it is based on a one-for-one and equaldivision.

Ms. WI.rEn. I think, however, that, while it is hardly going to bea major quip, I think it will contribute to the degree of investmenteach musician feels he has at each recording session, because lie maycontinue to enjoy the benefits of his labor if, indeed, his recordinZ ofa given piece is superior to someone else's recordin( of that same piece.

Mr. KASTENIMER. Miss Wiener, you represent the Department ofCommerce ?

Ms. WI NER. Yes.Mr. K.ASTENMiEIER. How imuch would this bill cost in a given year,

as far as you can calculate, broadcasters and other users of soundrecordings?

Ms. WiEN.RT. I regret to confess two things. One, fliat the best databaik available to me. a gentleman bv the name of McDonald Nyhenfrom the Industry and Trade Administration could not join me today.I suspect he could provide me with a ready answer and I would liketo take the opportunity to respond to that when I can see the. figures.

It is our impression that this is based on a rather small i-ercent andiii the grand scheme of things is not likely to be a dramatic figure.

Mr. K',ASTE.N1MEER. The reason I ask you is. of course, you have saidin 1967 foreign royalties for American composers and music p-ublish-ors amounted to over $13 million, and you have also indicated if wewere to create the rights to royalties for our own performers andproducers and make it reciprocal, foreign royalties to Americn per-formers and producers would be of thme same magnitude as foreignroyalties to American composers and l)ul)lisliers, tht is. $13 million.

So, obviously, in your statement there is some inmlicit knowledgeor at least opinion about what sort of revenues this would produce.

Ms. WITNE-FP. Yes. sir. IAt me (d1arify where those figures come fromand what I intended to suggest by those statements.

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Currently, when the royalty is calculated for composers and pub-lishers, a royalty is frequently calculated in this foreign nation forthe recording artists as well because the mechanism is all tied to-gether, particularly in Europe. However, those funds are then notreturned to the United States because we have no reciprocity withthem.

Precisely what happens to them we have not been able to find. Wedo know we would not be able to receive any back payments.

However, as things currently stand, American recordings abroadappear to be or American music abroad appears to occupy a largerpercent of their market than they occupy of ours. That, of course, isalways subject to change. But under the current situation, our artistswould not only be eligible for the royalties due. them from Americanbroadcasters, but what would appear to be a rather substantial amountof money due them from foreign broadcasters as well.

Mr. KASTENMEIER. Thank you.I yield to the gentleman from Massachusetts.Mr. JRINAN. Thank you, Mr. Chairman..Just following up on this, everywhere you go in the world you can't

get away from American music, and am I to understand that the per-formers are being cheated actually because of the failure of the Con-gress to enact this law and the failure of the United States to go intothe treaty ?

MNS. WIENER. Congressman, that would appear to be true, and it'sparticularly ironic because the Rome Convention which created theinternational mechanism for this correction, was spearheaded by ef-forts of America.

We are now one of the nations who is not a signatory, but this so-called creative and forward-looking element was drafted largelythrough the influence of American industry.

Mr. DRINAN. Are we the only major nation that is not a signatory, if50 nations belong?

Ms. VIENER. No, there are 50 nations which have recording rights,performance rights royalties. Of course, there are 15 who are signa-tories to the Rome Convention. We do not currently fall into eithercategory.

Mr. I)ni 'A. ,Just tell me about the mechanics, if you will, as to whatwould happen if this bill passed in some form and if then the Senateconcurred in, is this a treaty, the Rome Convention? Would the Sen-ate have to concur?

Aside from that, suppose we became a member of the Rome Conven-tion, what is the mechanism or method by which the composer in Peoriaor the performer would, in fact, collect some money?

Ms. WIVE.N1R. Both the Danielson bill and the Copyright Office pro-posals agree, propose a method of collection.

Mr. DRINAN. That same method would apply to foreign payments,too?

MS. WVEINER. Yes, whatever, once we have a vehicle for collectingperformance rights, that would also be the vehicle which would ad-dress the foreign funds as well.

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Mr. DRINAN. Going back to the Rome Convention, were the com-posers and artists and performers active in seeking this Conventionor was it the industry?

Ms. WnER. I am sorry, Congressman, I can find that for you, butI am not that well versed in it.

Mfr. DR I.;NAN. You're not expected to know that, but I am just won-dering why the performers have not brought their case, so to speak,to the public more aggressively than they have. You may recall duringthe copyright bill this question came up, and it lost in the subcom-mittee, as I recall, four to three, but I don't recall being struck withthe equity of the case as I am now.

Ms. WIEXER. I think, Congressman, that when you talk about per-formers and when you talk about the arts constituency in general.you are talking about a group of people who are working extremelyhard at their profession under economic situations that would be, withthe exception of a few nameable major stars, are clearly not to beenvied. And the time and funds available to them to really make thecase for their needs is not always what it ought to be.

Mr. DRINAN. Would you say that the theory is very clear that thesethings are copyrightable and copyrighted and there should be somecompensation pursuant to the basic principles of copyright law, wouldyou say, therefore, that the only argument against it is the argumentof the broadcasters that they cannot afford it ?

Ms. WIENER. That would appear to be the only constituency who isopposed to it. Previous testimony which we have reviewed indicatesa very impressive commonality of interest between labor and manage-ment on this particular effort, as well as support from consumer or-ganizations and professional arts organizations, and it would seem inthis instance that the broadcasters stand alone in their dismay ordistress.

Mr. DixAx. Thank you very much. This is excellent testimony,and I am grateful.

Ms. WIENER. Thank you, sir.Mrl'. KASTENIMEIER. Does the gentleman from Pennsylvania have

any questions?Mr. ERTEL. I have no questions. I am sorry I was not here to hear

your complete testimony. I have read it, and thank you.Mis. VIENER. Thank you.Mr. KASTE.MFR. The committee. thanks Ms. Wiener for her pres-

entation this morning, and the Chair should announce this concludesour regular hearing on copyright.

We have a number of submissions yet, to receive related to this issue.of performance rights in sound recordings.

The Chair would not totally rule out the possibility we would againneed to have a hearing date set for possible other aspects of this legis-lation but, as of the moment, this concludes our regularly scheduledhearing on the subject.

The Chair would remind Members that we have a bill on the floorthis afternoon and, with that, the meeting is adjourned.

rWhereupon, at 11:15 a.m., the Subcommittee on Courts, Civil Lib-erties and the Administration of Justice adjourned.]

ADDITIONAL STATEMENT

STATEMENT OF AMERICAN BROADCASTING COMPANIES, INC.-MAY 2, 1978

American Broadcasting Companies, Inc. (ABC) submits this statement to theSubcommittee in connection with its hearings on 1I.R. 6063 which proposes toinstitute a performance right in sound recordings.

Since the Institution of proceedings iii this matter by the Register of Copyrightsin April, 1977, ABC has been an active participant In opposition to the grantingof another use royalty for sound recordings.' Comments opposing the perform-ance royalty proposal were submitted by ABC on May 31 and June 15, 1977. InJuly, 1977, witness John Winnaman, General Manager of ABC's KLOS (FM),testified in hearings convened by the Register of Copyrights in Los Angeles forthe purpose of further presenting ABC's views on this matter. And, on December1, 1977, ABC submitted comments on the so-called "Werner Report" which wascommissioned by the Register for the purpose of evaluating the economic issuespresented.'

While each of these presentations is included in the official record compiledby the Copyright Office during the last twelve months, and we respectfully callthe Subcommittee's attention to them, a summary of our views may be helpfulto the Subcommittee.

In its earlier comments in this proceedings, ABC demonstrated thatPerformers and record companies do not provide a sufficiently unique

contribution, cognizable under the Copyright Law, that Is not already ade-quately compensated; ,

In view of the fact that broadcast stations represent the principal promo-tional device leading to the success and well-being of recording artists andcompanies, the proposed performance royalty would amount to an unfair(and burdensome) tax on the broadcast industry ; ' and,

Creation of a performance royalty, contrary to the Intent of Article I,Section 8 of the Constitution, would likely produce disadvantages to the pub-lic welfare and would not stimulate artistic endeavor.5

And, in subsequent comments on the Werner Report, ABC noted thatRather than presenting an independent and objective analysis of the eco-

nomic merits of the performance royalty proposal, the Report is designedsimply to rebut arguments presented against the proposal;

The Report-being directed solely to the question of whether the perform-ance royalty will force some broadcast stations out-of-business-fails toaddress the principal broadcaster position that the proposal Is unfair andwould likely engender reductions in public service oriented programming; 6

The evidence offered to support the Report's conclusion that radio stationFCC financial reports do not accurately reflect broadcast station profit-ability is not only seriously deficient but is premised upon a series of assump-tions and hypotheses which have no basis in fact; 'and

Because the Report's assumptions and conclusions concerning the eco-nomics or radio broadcasting are in conflict with reality, it fails to support itsprincipal conclusion that the radio broadcast industry can afford to pay asecond use royalty fee.6

I At present, the broadcast industry pays over $100,000,000 annually for music licensefees.

2 "An Economic Impact Analvsis of a Proposed Chanre In the Copyright Law". byStophen M. Werner of the firm Rittenher . Friedman, Kilgallon. Gutchess and Associates.

'See ABC Comments, pages 9-13: ABC Reply Comments, page 6.4 ABC Comments, pages 14-16: ABC ReplI Comments. page 5.5ABC Comments. pages 5--9l: ABC Riply Comments. pages 3-4.'ABC Further "omments. December 1, 1977, pages 4-7.'ABC Further Comments, pages 7-12.' ABC Further Comments, pages 12-15.

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Rather than again detail the basis for these concluslons-all of which are al-ready set forth in our earlier filings-ABC will herein address what it considersto be the essence of the performance royalty question. As discussed more fullybelow, when viewed in its proper context: (1) the performance royalty issueis, in reality, a proposal to readjust economic relationship between the recordcompanies and their "employees"; 9 (2) it Is unnecessary to require the broadcastindustry to shoulder this burden when the record industry is well able to do so;and (3) the performance royalty Is most unfair to broadcasters who representthe principal promotional vehicle leading to the success and well-being of record-ing artists and companies.

THE PRINCIPLE JUSTIFICATION FOR THE PERFORMANCE ROYALTY PROPOSAL THAT ITWILL COMPENSATE UNDERPAID PERFORMERS IS A RECORD COMPANY CONCERN ANDNOT ONE FOR TIE COPYRIGHT LAW

In the myriad of comments filed and testimony offered by the proponents of aperformance right in sound recordings, one overriding justification now emerges;that a performance royalty will provide additional income to background singers,musician sidemen, and the like. However, when one considers that the recordcompanies are to receive 50 percent of the royalty revenues and that the admin-istrative costs of implementing the royalty proposal are expected to be substan-tial, very little, if anything, will be left to the remaining participants.?0

More importantly, whatever the validity of this justification, it is a record,ndustry concern-not one for the Copyright Law. The Constitutional basis forCongressional authorization of copyright protection is to "promote the Progressof Science and useful Arts" '1-not to provide a means for redistributing Incomefrom one industry to another.' Nor is it intended as a substitute for collectivebargaining procedures under applicable labor laws.

If non-star performers such as background singers and sidemen are under-paid, this is a matter for the recording industry to deal with in the context oftraditional employer-employee relationships; it should not be clouded by theinjection of so-called "copyright" considerations. Government intervention insuch a process here will inevitably lead to requests that Congress "legislate"compensation adjustments in other industries. We do not think the Constitutionintended that Congress thrust itself into commercial enterprise in this mannerunder the quise of the Copyright laws.

THE RECORD INDUSTRY IS WELL ABLE TO AFFORD COMPENSATION ADJUSTMENTS TO ITSEMPLOYEES

A very critical aspect of the economic issue involved in the performanceroyalty matter has been ignored by the Copyright Office; it similarly finds noplace in the multi-page Werner Report. While both conclude that the perform-ance royalty will not yield a substantial windfall to the record companies.neither acknowledges the fact that the record companies do not need suchroyalties and, in fact, are in a better position to fund additional compensationto background musicians and singers than is the radio broadcast industry.

In 1976, total record and tape sales exceeded $2.7 'billion-a 15.9 percentincrease over 1975.' Profit figures for some of the major producers are similarlyimpressive:

"RCA Records celebrated its 75th anniversary with an all-time high in salesand a doubling of earnings for a second consecutive year. - .. RCA Records

OThe term "employer" is used broadly to include those Individuals hired to providespecific services on a contractual basis.10 Evidence In the record before the Copyright Office indicates that, tinder certain assump-tlnon, the administrative costs of implerneutation could well "eat tip" all of the estimatedt$15,000,000 in royalty payments. And, even if this were not the case, testimony by pro-ponents of the bill (Los Angeles. July. 1977), indicate that these individuals are likely toreceive only several hundred dollars annually as their share of the royalties.

1 Article 1, section q. clause 8.1 Conyriht protection as we know it is a statutorly created richt to which no Individual

or entity it, automatically entitled as a matter of law or polley. The courts hare con-sistentlr held that In enacting copyright legislation pursuant to the grant of Constitutionnlauthority. Congress must give paramount consideration to the advancement of the publicwelfare: remuneration to the owner-or, in this case. the performer-is only of secondaryimportance. Mtaor v. Rtein, 347 U.S. 201 at 219 (1954). See also Kendall v. Wisor, 21How R22. 327-28 (18591.

uBillboard International Buyers Guide, 1977-78, page 8.

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improved its market share at home and abroad." (RCA Annual Report, 1976,page 4.)

"Arista Records experienced the most productive year In its history, showingnearly 300 percent growth in net revenues since its formation under the directionof President Clive Davis in 1974." (Columbia Pictures Industries, Inc., AnnualReport, Fiscal 1977, page 22.)

"Warner Communications "recorded music and music publishing showed gainsof 32 percent in revenues and 13 percent in pretax income over last year's re-sults .. " (Securities and Exchange Commission Form 10-Q for the quarterending September 30, 1977, page 9.)

The record Industry as a whole is clearly prospering without a public per-formance right, as are many recording artists.

By contrast, the radio broadcast industry is characterized by declining profitmargins."' And recent Federal Communications Commission (FCC) statisticsshow a declln. in the number of radio stations reporting profitable operations.'3

In this connection the Register, relying on the Werner Report, concludes thatthere "is no hard economic evidence in the record to support arguments that a per-formance royalty would disrupt the broadcasting industry, adversely affect pro-graming, and drive marginal stations out of business." " Logic, however, compelsthe conclusion that the imposition of an additional royalty payment on radio sta-tions (particularly unprofitable or marginal operations) would require that radiobroadcasters make certain judgments concerning the implementation of operatingadjustments and other cost saving means to offset the additional costs incurred.",As suggested by many of those participating in the hearing, such measure wouldinclude cutback in news services, public affairs and other program areeas thatare generally not highly profitable in their return to the broadcaster. The ques-tion here-not fully addressed by the Register-is whether the risk of a reduc-tion in broadcast-service quality is outweighed by the necessity of imposing uponradio broadcasters the obligation to provide additional compensation to recordcompany employees. We do not think it is.

THE PROPOSED ROYALTY IS UNFAIR TO BROADCASTERS WHO ARE LARGELY RESPONSIBLEFOR THE SUCCESS OF RECORDING ARTISTS AND RECORD COMPANIES

A second royalty payment for sound recordings would be most unfair to broad-casters in view of the fact that it is the broadcast industry which is singularlyresponsible for the financial success of composer, artists, record publishers andproducers, alike. No recognition at all is given in the bill to the substantial valueinherent in broadcast air play. The Register states that this "is the strongest argu-ment put forward by broadcasters. .. .,, Is Nevertheless, she concludes that while"there is no question that broadcasting and jukebox performances give some re-cordings the kind of exposure that benefits their producers and individual per-formers through increased sales and popularity", the "benefits are hit-or-miss.""

1, Spe FCC Public Notice, Nov. 8, 1976, Mimeo 73357, Table 2:Year: Ya rRadio profits as percent

of revenues196 ------------------------------------------------------------- 11.091972 ----------------------------------------------------------- 9.551975 ----------------------------------------------------------- 5.30

"According to the FCC, in 1973. 69% of AM and AM/PM stations reported a profit; in1974 this percentage dropped to 65% : in 1975. the percentage dropped to 61% : and. In1976. it rose slightly to 67%. Only 49% of independent FM stations reported earning aprofit In 1976. FCC Public Notice. Dec. 13. 1977. Mimeo 92277.

16 Addendum to the Report of the Register of Copyrights on Performance Rights InSound Recordings, page 10.

17 These adjustments would not necessarily be tied to a station's profit level, althoughstations in a poor financial condition could be expected to implement such cost savingadjustments much more quickly than their more profitable connterparts. It is Important toremember in this context that the payment schedule in the proposed legislation Is tied to"receipts" not profits, so that a station showing revenues of $400.000 would still p:1y aroyalty fee of $4,000. even though it was a loss operation.1 A addendum, supra, page 9.

9 28 .

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As the Register reluctantly recognizes, there is no question that the recordIndustry is dependent, in large part, upon radio broadcasting for its success. Thecomments filed, and the oral testimony given, show conclusively that the radiobroadcast industry represents the principal promotional device leading to the suc-cess and well-being of recording artists and companies.)

For more than fifty years broadcasting stations have substantially benefitedrecording companies and artists (not to mention the composers who are alreadyentitled to use royalties under existing copyright) by providing essentially freeand valuable exposure for new recordings:

"Broadcasters would seem to be doubly injured. They must pay fees for play-ing recrods which they previously played without charge [i.e., for performer'srights], and they are deprived of the opportunity of using negotiations over publicperformance fees as a means of recouping the value of the free advertising theyprovide the record industry

The contribution made by air play to the sale of records Is more than enoughto permit the record companies to make whatever increased payments are merited.

CONCLUSION

ABC firmly believes that the establishment of a record public performance rightis unsound public policy. ABC urges the Congress to retain Section 114 of theCopyright Act (17 U.S.C. § 114) in its present form and that a new performanceroyalty in sound recordings not be established.

SUPPLEMENTAL STATEMENT OF AMERICAN FEDERATION OF MUSICIANS, AMERICANFEDERATION OF TELEVISION AND RADIO ARTISTS AND RECORDING INDUSTRY Asso-CIATION or AMERICA, INC.

This Supplemental Statement is submitted by the American Federation ofusicians (AFM), the American Federation of Television and Radio Artists

(AFTRA), and the Recording Industry Association of America, [in. (RIAA) inre.qponse to the request of the Subcommitee on Courts, Civil Liberties, and theAdministration of Justice of the House Judiciary Committee for additional infor-mation regarding the implementation of the collection and distribution af per-formance royalties under H.R. 6003.

I. INTRODUCTION

Some have suggested that collecting royalties from the users of copyrightedsound recordings and distributing them to performers and recording companieswould be highly complex. They have stated that the collection and distribution ofroyalties will impose substantial paperwork burdens on radio stations and otherusers. Critics of the legislation have predicted that the cost of these administra-tive functions would be prohibitive.

The fact is, however, that collecting and distributing royalties for the publicperformance of sound recordings is not complicated at all. Such administrativefunctions are already routinely performed, efficiently and economically, by per-forming rights organizations In the United States (ASCAP, BMI, SESAC) and allaround the world (e.g., Gramex. PPL, LSG, GVL). Moreover, the 1076 revision ofthe Copyright Law provides still additional models for the collection and distribu-tion of royalties now required to be paid by cable system operators (Section 111),Jukebox operators (Section 116) and public broadcasting (Section 118).

To put an end, once and for all, to these concerns about the implementation of aperformance right for sound recordings, AFM, AFTRA and RIAA have jointlydeveloped, for the record, a model system for the collection and distribution ofroyalties. This model is simple, cost-effective and equitable. It can be accomplished,we believe, for less than $750,000 a year.

We do not propose this model as the only method for collecting and distributingroyalties. There are undoubtedly other workable approaches. This model, cer-

"The hearing record shows that almost without exception record companies and Indi-vidMl0 artists plead with broadcast stations to air their records-sometimes going to theextreme of offering illegal payments in exchange for air nlay.

2 "A Publtp Performance Right in Records : How to Alter the Copyright Ryster WithoutJmprovinq It". Robert L. Bard and Lewis S. Kurlantzick. The George Washington LawReview, Vol. 43, No. 1, pages 152-238, November, 1974, as page 204.

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tainly, will illustrate that a performance right in sound recordings can be admin-istered fairly and efficiently.

U. A PROPOSED MODEL

We set forth below, step by step, each of the administrative functions that mustbe carried out to monitor the public performance of recordings, and to collect anddistribute performance royalties. We then describe what we believe would be anefficient technique for accomplishing each such function.A. Collection of royalties

1. Registration.-A prerequisite for the collection of performance royalties isthat users of copyrighted sound recordings register to obtain a compulsory li-cense. We propose that users do so by filing a single form with the Copyright Of-fice (with updated filings as necessary). The form to be filed should be promul-gated by the Copyright Office, after consultation witir-le Copyright RoyaltyTribunal.

The procedures for such registration are already well-established under exist-ing copyright law. There are two direct precedents:

(1) Cable system operators are required to file in the Copyright Office "a no-tice including a statement of the identity and address of the person who owns oroperates the secondary transmission service or has power to exercise primarycontrol over it, together with the name and location of the primary transmitteror primary transmitters whose signals are regularly carried by the cable sys-tem .... " 17 U.S.C. § 111(b) (1).

(2) Operators of coin-operated phonorecord players (jukeboxes) are likewiserequired to file in the Copyright Office "an application containing the name andaddress of the operator of the phonorecord player and the manufacturer andserial number or other explicit identification of the phonorecord player .... " 17U.S.C. I 116(b) (1) (A).'

In both situations, the Register of Copyrights is to prescribe by regulation(after consultation with the Copyright Royalty Tribunal) the information to beincluded in the form. Section 114(c) (3) (A) of the draft bill prepared by theCopyright Office proposes essentially the same registration procedure for usersof copyrighted sound recordings. We endorse that approach.

It is noteworthy that, under this system, registration forms would have tocbe filed with the Copyright Office only infrequently. Cable systems, for example,are required to file either one month before they commence operations, or within180 days after the enactment of the copyright law, whichever is later. Registra-tion Is required thereafter only when the ownership or control or the signalcarriage complement of the cable system changes. This model is probably appro-priate for sound recordings, too.

Thus, the administrative burden on users of copyrighted sound recordingswould be minimal, limited in most cases to the filing of a single form with theCopyright Office.

2. Collection of Fee.-We propose that the collection of the royalty fees also.be handled by the Copyright Office.

The Copyright Office is already performing this function in connection withtwo of-the compulsory licenses newly created by the 1976 revision of the copy-right law. It Is collecting royalties on a semi-annual basis from cable systemoperators (Section 111(d) (2)), and on an annual basis from jukebox opera-tors, (Section 116(b) (1) (A)). It would be Just as simple for the CopyrightOffice to collect once each year a royalty payment from radio stations and otheruser$of copyrighted sound recordings.B. Distribution of royalties

1. Monitoring and Weighting Airplay.-To determine the appropriate distribu-tion of royalties among performers and- record companies, It is necessary todevelop a data base which will (a) Identify the copyrighted sound recordingsbeing performed, and (b) measure the use of those copyrighted sound record-Ings on a comparative basis.

We proposed that this administrative function be performed by a privateentity under the supervision of the Copyright Royalty Tribunal. The Tribunal

I Unlike the situation with Jukebox operators, the major users of copyrighted sound re-cordings-radio stations--can easily be notified of their obligation to register. They irereadily identifiable since they are licensed by the Federal Communications Commission.

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would be directed to review the procedures developed by the private organiza-tion to assure that its monitoring approach accurately depicts the performanceof copyrighted sound recordings in the United States.

The actual compilation of the data can be performed by either of two existingperforming rights societies or by another organization. Existing organizations-ASCAP and BMI-have been identifying and measuring the use of copyrightedmusical composition for 64 and 39 years, respectively. We believe it would bepossible for either of these organizations to augment their current systems toaccommodate the information required for logging sound recordings, too.' Theuse of one of these existing organizations could be advantageous in that itshould be relatively inexpensive to augment a system alreadyy operational.'Moreover, composers and publishers could benefit from a reduction in theirshare of the administrative costs of the operation.

Because we cannot assure the Subcommittee that either or both of these pri-vale entities would be willing to perform this function, however, and becausewe cannot now estimate the incremental costs of such activities to ASCAP orBMI, we have chosen an independent approach. We solicited the advice of onepf the nation's leading experts in opinion research and data gathering-BurnsW. Roper, Chairman of The Roper Organization Inc. (Mr. Roper's background isdescribed in an attachment to this Statement.)

We asked Mr. Roper to devise a system to measure the public performance ofcopyrighted sound recordings across the United States. lie came up with a systemthat is of startling simplicity and relatively modest cost.

A copy of Mr. Roper's proposal is attached to this submission. It is the pro-posal itself that most clearly describes Roper's system for achieving a reliableand continuing measure of the recordings played over the nation's radio sta-tions. We briefly summarize the key points:

Roper would monitor a statistically valid sample of radio time segments todetermine airplay. He offers two alternatives for monitoring: (1) on-air moni-toring, using panels of experts to identify the recordings, and (2) special stationlogs. There are precedents for each approach (ASCAP uses both techniques,while BMI relies on logs exclusively), and Roper discusses the pros and consof each. On-air monitoring imposes virtually no burden on the radio stationbeing taped. The logging system costs less and produces a larger sample.

Roper's sample would be many times greater than that employed for a typicalnational opinion poll. He proposes monitoring 20,000 radio time segments. Thissample would encompass some 50,000 recordings, if done by on-air monitoring, or300,000 recordings, if done by logging. Roper calculates the margin for error atless than plus or minus three-quarters of one percent, compared to three percentfor the typical national poll. The size of the sample reduces to a practical min-imum the chance that an individual performer or recording company will not becompensated because "their" recording was missed in the sampling.4

A weighting system would be used to achieve a fair distribution of royalties.These weights would reflect such factors as airplay on large stations vs. small,prime time vs. off-hours, length of recording, etc. We suggest the weightingformulas be developed by the Copyright Royalty Tribunal to assume fairness toall royalty recipients.'

2 Indeed, the prevailing international practice Is for the composer/publisher performingrights societies to collect royalties for the public performance of sound recordings for dIs-tribition to recording comp~anips and performers. See Sixth Ordinary Session of Inver-

overumental Committee of the International Conivention for thp Protection of Performers.Producers of Phonograms and Broadcasting Organisations, ILO/Unesco/WIPO/ICR. d/7Add. 1. Paragraph 2.5 Dccember. 1977).

s The economic report prepared for the Copyright Office la connection with Its study onthe creation of a performance right in sound recordtnvq likewise smueests that the opera.tlong of ASCAP and BMI could be augmented, and note. that the "incremental costs" ofdoinz so "should not be considerable." 'Performnnce Rights in Sound Recordings." Com-mittee Print No. 15 of Subcommittee on Courtg, Civil Liberties, and the Administration ofJinitle of the House Tudiciary Committee. 95th Cong., 2d Sess. at 10,R-109.

4 This chance can he lessened somewhat-although not by much-by increasing the sizeof the sample substantially, at much greater cost.

r Any number of factors can be accounted for by the use of a weighting formula. ASCAPnttennts to reject differences in the economic value of performances by the use of a veryrefined weighting formula, which adjusts for the following variables. amone others:

The use of the copyrighted sound recordings (i.e., whether It Is the featured perform-anep. used as a theme for a show. as bnckgrouind. ,s a lin'.le, etc.) :

The time of day that the performance is broadcast (i.e., morning, evening, weekday,weekend, holiday. etc.)

The medium of the performance (i.e., local radio station, network radio, local tele-vision, network television. etc.) :

The length of the actual performance : andThe nature of the work (i.e., entertainment, concert and symphonic, religious, etc.).

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The end product of the Roper proposal is a computer printout listing all record-ings played on the air throughout the year, and the percentage of the royaltypot to which each recording Is entitled.

Using this data, a paymaster can allocate and distribute the royalty funds torecipients--0 percent to the singers and musicians, and 50 percent to the record-ing companies, as provided in H.R. 6063, and advocated by each of the organiza-tions submitting this Statement.

The proposal envisions monitoring radio airplay, but not television or jukeboxes,discos, restaurants, etc. We believe that the public performances of recordingsover the radio should reflect with reasonable accuracy the public performanceof recordings generally.6

Roper estimates that It would cost around $500,000 a year to operate thisprogram using the on-air monitoring approach. Using station logs, it wouldrun around $30,000.

2. Distribution Procedures-Royalty payments should be disbursed by a privatefirm with the computer capability to handle large-scale distribution of funds.Such a firm can be retained by the Copyright Royalty Tribunal to perform th1smanagerial function in accordance with procedures approved by the Tribunal.

This firm would receive from the monitoring firm (such as Roper) the namesof those recordings which are entitled to a portion of the total royalty pool. Thefirm would maintain a computerized data bank identifying the royalty recipientsfor each of the copyrighted sound recordings earning performance royalties. Thenames and addresses of those royalty recipients can readily be provided by therecording companies, since such information must be maintained by them inaccordance with their agreements with AFM and AFTRA. (A sample of theforms required to be completed at the time of the recording session is attached.)

The United States Trust Company of New York City estimates that it can per-form this function for $100,000 to $120,000 a year, exclusive of postal costs (whichare difficult to calculate at this writing). This estimate has been calculated onthe assumption that there will be around 40,000 royalty recipients.7

3. Distribution Dispute&.-In the event of controversy over the equitable dis-tribution of the performance royalties, we propose that the Copyright RoyaltyTribunal adjudicate the issue.

The Tribunal has already been assigned this task in connection with conrop-versies concerning the distribution of royalties from cable system operators (See-tion 111 (d) (5) (B)) and jukebox operators (Section 116(c) (3)). Those pro-visions specify that, where such a controversy exists, the Tribunal shall, pursuantto Chapter 8 of the new copyright law, conduct a proceeding to determine thedistribution of royalty fees. That chapter specifies that the Tribunal shall besubject to the provisions of the Administrative Procedure Act, and that final de-cisions of .the Tribunal may be appealed to the U.S. Court of Appeals (17 U.S.C.§ 803(a) and 810).

Section 114(c) (12) of the draft bill proposed by the Copyright office adoptsthis same approach with respect to distributions of royalty fees for the perform-ance of copyrighted sound recordings. We endorse that proposal.

IIl. CONCLUSION

We hope and believe this proposal will demonstrate to the Subcommittee thatthe provisions of H.R. 6063 can be implemented promptly, fairly, and efficiently.

We hope the relative simplicity and modest cost of this proposal will alleviatethe concerns expressed by several Members concerning potential administrativecomplexities. The fact that other organizations routinely perform similar func-tions today should minimize some of those concerns. Mr. Roper's ability to devisean independent system to measure airplay of recordings should provide furtherasstrance-of the feasibility of Implementing a performance right in soundrecordings.

Should blembers of the Subcommitee, or its Staff, wish further informationconcerning this proposal, we will be happy to provide it. Mr. Roper is also avail-able to respond to any questions or suggestions that may arise.

0'Neither ASCAP nor BMI monitor performances by jukeboxes. discos. restaurants. etc.They do, however, monitor television airplay, with good reason. MuMscal compositions are afundamental element in TV programming, as ASCAP/BMI royalty revenues reflect. Formeasgiring the use of sound recordings, however, we believe that television monitoringwould he an nnecessarv additional expense. It can, of course, be included in the samplesho d Congress or the Tribunal deem It necessary.

7 We estimate that 27,000 musicians and 8-9,000 singers make recordings each year.

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THE ROPER ORGANIZATION INC.

A RESEARCH PROPOSALPurpose

The purpose of this proposed research is to provide a reliable and continuingmeasure of the recordings played over radio stations (AM and FM). The resultswill be used as the basis for an equitable allocation of performance royalties tothe performers and recording companies whose recorded works are being publiclyperformed.Baslo research method

For this purpose, we suggest that recordings played on radio may adequatelyreflect public performance generally-on television, in discos, night clubs, restau-rants, and on juke boxes. The recordings heard on radio are undoubtedly a largeportion of the total recordings heard in public performances. Moreover, the mixof recordings played on radio is probably not dissimilar to the mix of other publicperformances of recordings. While other areas can, of course, be monitored if thegovernment thinks it necessary, there may be no need to take on this additionalexpense.

We propose that a sample of all the recordings played on air over the courseof a year be developed. (To audit every recording played every hour of the dayevery day of the year on each of the AM and FM radio stations in the countryis unnecessary in tei'ms of accuracy and excessive in terms of cost.) The samplewe propose, while a small fraction of the total recordings played in the courseof a year, will be huge in opinion sampling terms and will have a minisculesampling error. Specifically, we propose to monitor some 20,000 broadcast timesegments over the course of a year. Depending on the data collection system used,this will represent some 50,000 recordings played during the course of a year(if on-air monitoring is the data collection method used), or some 300,000 re-cordings a year (if station logs are used). While 300,000 recordings clearly willprovide somewhat greater reliability than 50,000, the sampling error resultingfrom either size of sample is so small as to be Inconsequential.

It might be asked why 50,000 or 300,000? Why not more? The maximum likelyerror on a sample of 50,000 is plus or minus 0.61 percentage points. That is, if,our proposed sampling method showed that 50.0 percent of total plays duringthe year were on recordings made by Company X, the actual plays of Com-pany X's recordings would be (not less than 49.39 percent of total plays and notmore than 50.61 percent. If the sample were Increased fivefold-to 300,000-theerror range would be little reduced (49.75 percent to 50.25 percent).1 At lowerindicated percentages of total recordings played, the error would be even less-plus or minus 0.37 percentage points if the indicated percentage for a companyor artist was 10.0 percent and the sample size were 50,000; plus or minus 0.12points If the indicated percentage for a company or artist was 1.0 percent.

The 50,000-300,000 range seems optimum to us--large enough to Insure that nosignificant injustice is done to a recording company or artist, yet economicalenough to insure against a large proportion of the "royalty pot" being used topay for measurement costs rather than royalty payments.Universe to be sampled

It would be relatively simple to develop a sample of broadcast hours and thento determine what recordings are played during those broadcast hours: the trans-mitting hours by day of the week could be determined for every AM and FM sta-tion In the land, every nth hour could be selected, and the recordings playedduring those nth hours could be determined. This would give an accurate repre-sentation of what is played-but not of what is being heard. Such an approachwould give equal weight to a given recording played over a five watt station in aremote rural county at 3:00 in the morning and the same recording played overa major AM station in a large metropolitan area in prime time.

In our judgment, the measurement to be obtained should not be merely whatIs played, but should take into account, at least in part, what is heard also. Inother words, it should take into account audiEnice. In most performer/audiencesituations the compensation to the performer is highly related to the size of the.audience.

I If 5.000.000 recordings were sampled a not much smaller error would still exist--4q.M1% to 150.04%. Thus, increasing the sample 10 times, and increasing thp costs nearly10 times, would increase the accuracy by Just over one-half of a percentage point.

FI

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Thus, the universe to be sampled as we see it is not total broadcast hours, butrather those hours that the nation's population can listen to radio. This is theuniverse that we recommend be sampled.

While a sample of the radio hours the nation can listen to does not necessarilyequate with the radio hours the nation does listen to, we will describe proceduressubsequently which will convert the hours (and recordings) the nation can hearinto the hours (and recordings) the nation does hear.The sample

We propose to use our standard 100 point I national sample. This set of countiesis representative of the nation's population and has produced a high degree ofaccuracy under all kinds of situations and measurement tasks.'

Since those sampling points represent the nation's population with a highdegree of accuracy, what is broadcast by the radio stations that serve those sam-pling points is representative of the recordings that the population of the UnitedStates can hear. Were we conducting a national survey of the public's radiolistening and if we decided to base that survey on 2,000 interviews, we wouldconduct 20 interviews in each of the 100 sampling points.' In fact, that would beone approach to determining what recordings the nation does hear-to interviewa sample of people in those 100 sampling points and ask them what they hear. Wedo not propose this, however, because people cannot accurately recall all theyhave heard; and to ask them to keep diaries would be onerous, hence conduciveto great error and informational gape.

But, In theory, a national sample of people-listeners and potential listeners-is an appropriate base from which to determine what is heard.

We propose, however, to determine what is heardliy sampling listening hoursrather than listeners. Hence, in this national population example, we would haveto change the sampling unit from 20 people per location to 20 potential listeningsegments per location.

Actually, we propose substantially more than 20 time segments per location.In fact, over the course of a year we are proposing in excess of 200 time seg-ments per location. Of the less than 9,000 hours that exist in a year, we willsample over 200 hours in each sampling point. When all of the sampling pointsare combined, this will provide over 20,000 time segments, which will distributeuniformly through all 100 markets, over all 365 dav3 of the year, through all24 hours of the day. To be sure, there are some markets where there is no allnight radio. Some of the 20,000 plus time segments selected will be at such timesin such markets. But these time segments will be rpresented in the design andthey will get their proper weight-namely "0".

So much for the representativeness of the hours. Once a given hour on a given(lay in a given location is selected as a sample hour, a single station will beselected at random from all of these stations in that market which are on-airin that time period. Over the course of the 200-plus time segments per marketper year, all of the stations in any given market will be selected several timesand in some markets possibly 30 or 40 times. It might seem that picking onestation out of the, say, 20 that are on the air at a given time in New York andsimilarly picking one station in a rural area out of the, say, four or five that areon the air is overrepresenttng the smaller market relative to the larger. But sincethe appropriate universe is potential listening hours, not broadcast hours, andsince the limit that any individual can listen to the radio in any given market is24 hours and the limit to the number of stations that any person can listen to atany one time is one, one station in each market in each selected hour representsequity as between large and small markets.'

'A "point" is a county.It is. specifically, the set of sampling points that we used to predict President Carter's

victory in 1976. It was also the basis for selecting the precincts which the AssociatedPress used for its "exit interview survey" on election day. We are toldl that the 2500 inter-views conducted by the AP in the 100 sampling point precinct sample we designed forthem came within one-tenth of one percent of President Carter's actual vote.

AIt is unnecessary to vary the number of interviews in each sampling point to reflectthe differing sizes of the communities, because the size of a community was taken intoaccount In the original probability of selection of each of the 100 points. That Is. a citv oftwo million had ten times the chance of being selected then a city of 200.000 did. Thus,putting the same number of interviewers into each selected point represents the differingpopulations of the communities proportionately.

'To be sure the potential listener in a many station market has more choices than in amarket with few stations. but he cannot listen to more than one at once. And over time allstations in the 100 sampling points will be represented.

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Converting what can be heard to what i8 heardNevertheless, while there will be proper representation of stations as between

one market and another with this suggested method, there will be an imbalanceor inequity of representation among sizes and types of stations within a market.For example, In New York during a given time period, say 6 to 7 p.m., a smallaudience FM station would have the same likelihood of heing selected to representthat time period as a major AM station like WABC, despite the sizable differ-ence in the audiences of the two stations. Clearly a play over WABC is "worthmore" than a play over a tiny FM station in New York. To correct for thisinequity-to bring what can be heard more nearly into line with what is heard-ve would recommend establishing a set of three or four or five or six station

classifications which would give extra weight to a play over a large audiencestation, lesser eight to plays over small stations, and still less weight to playsover the sndilest audience station,. Similar weights could be established tocompensate for peak listening hours-prime time versus early dawn listeninghours when most are asleep.'

These stations time of day, and length or recording weights-and any otherweights that seem appropriate-would have to be established with reference to)audience sizes and in a manner satisfactory to the recording artists, the recordcompanies and the Congress.

Data collectionThere are two basic ilethods by which it can he determined what recordings

are playe( during the sample tine segments. Broadcasters can keep logs of tilerecordings played on the (lays and in the hours during which a specific station'.output is being sampled. Alternatively, on-air monitoring can be employed to de-termine what the selected stations are playing during the sampled time periods.Logs have the definite advantage that longer time periods could be "processed"with fewer research personnel, and ience that costs would be lower. They alsohave the advantage of eliminating the inability of a listener to a monitoredperiod to Identify a given recording. However, there are also disadvantages tothe log. To obtain the Information by log requires the cooperation of tile broad-casting station in compiling the log to a uniform method of specificity and in legl-ide fashion. That is. all broadcast stations included In the sampling operationwould have to provide uniform data, on a common form, legibly enough so that itcould 1e read. A second drawback to the log method is that people outside ourorganization would know which stations were being included In the measurementfor which hours. and efforts might be made to insure that certain recordings gotplayed more than normally in those sampled segments. The possibility of "rigging"could be eliminated by requiring stations to keel) logs for a substantially greaternumber of time segments than are actually going to be used in the measurementoperation, thus facing the would-be rigger with so many hours to rig that he can-not do It. (Under the monitoring approach, the station would not know whetherIt was going to be monitored, much less when. Hence no rigging would be possible.)

Under a monitoring approach, we would assign each of our interviewers Ineach of the 100 markets a certain number of time periods every other week (in50 markets the even numbered weeks would be monitored; In the other 50 oddnumbered weeks would be monitored). Each time period would be Identified tothe interviewer by the day of the week, time of the day (or night) and stationcall letters and kilocycles. Each interviewer would he furnished with an AM/FMIradio, with a Jack which would permit a tape recorder to tape off tile line (ratherthan over the speaker). She would record the designated time segments on tilecaasettes and would identify each segment recorded by a segment serial num-ber. On completion of recording the designated time segments for a week, shewould return the cassette (s) to our offices.

We would have on staff two teams of recording experts-the kinds of peoplethat high volume recording retailers have on their staffs. The job of these ex-perts would lie to listen to the types and identify each recording played by titleof the recording, featured recording artist or group, and record company. Eachteam would consist of three experts. Where the experts could not Identify a re-cording. It would be held aside far subsequent review at a later date.

6 A weight also might be estAblshed for the length of the piece played. While this weightwonilo not be designed to adjust for audience size. it wmild seem that a 20 minute recordingshould probably get more weight than a 3 minute recording.

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In addition to the two full time panels of recording experts, we would main.tain, on a consultant basis additional recording experts of a more specializednature---classical music experts, soul music experts, country and western experts,etc. These experts would be convened, perhaps once a month, to review thoserecordings that the on-going panels were unable to identify.

Once the recordings are identified, whether by log or by listening to tapes, therecordings so played will be entered into a computer by a serial number T whichwill identify the recording and the recording company. At the same time, appro-priate weights for station size, time of day or night, length of play, etc. will alsobe entered. Since royalties are to be paid once a year, it will be necessary tosu mmarize the data Just once a year.

If the data is collected by log, we would recommend that'all recordings playedduring each full hour period be entered into the computer and tabulated. If thedata Is collected by on-air monitoring, we would recommend that a randomlyselected ten minute period of each sample hour be taped, Identified and enteredinto the computer. Obviously, logs for a full hour represent six times as manypotential recordings as taped segments of ten minutes each. However, theeconomics of the situation argue against recording and listening to a full hourof tape. Moreover, the gain in the accuracy of information that would be ob-tained from an hour's log versus a ten minute sample is small, as noted earlier.But since an hour's worth of data can be entered into the computer front logswith fewer man hours than ten minutes' worth of data can be entered from tapes,the marginal gain in accuracy is worth it since it results from less time and cost.

If monitored ten minute segments are used, no entry would be made for anyrecording played for less than one minute. Identification of less than one min-ute's Worth of a recording could, in certain circumstances, be extremely difficult.Hence, the concluding seconds of a recording at the beginning of a ten minute seg-ment or. the opening seconds at the close of a ten minute segment would not becounted in the tabulation unless there were a minute or more of play.A88ernbling the data

Part of the" process of assembling the data has already been described--enter-big in the computer the number of the recording, including the designation ofthe recording company and the appropriate weights for station size, time of dayor nigift, and length of play.

The output of the computer will consist of the weighted number of plays ofevery specific recording that was played in any of the time segments in any ofthe markets in any of the stations over the course of a year. The weighted totalnumber of plays of all recordings will be added up in the computer-the total"credits" that the royalties collected are to compensate. In addition, the computerwill print out the number of those total credits that are allocable to each record-iug played. Thus the total royalty pot, divided by the total number of credits(all rLcordings played in all time segments in all markets in the course of ayear) will determine the value of a credit. The number of credits a given record-ing receives, times the value of a credit, will determine the total dollare value ofthe royalties for public performances of that recording.

A fiduciary company will handle the computing, check writing and mailingof individual monetary payments to recording artists and record- companies.We will supply that company with a printout at year end that will show totalrecording plays (or total credits) for all recordings, number of plays for eachrecord company (credits for each companyy, and number of credits for eachrecording (credits to be divided among the artists involved in the recording).-This will enable the fiduciary company to compute the value of a credit oncethe value of the "royalty pot" for tile year is known (total dollars divided bytotal credits or plays equals dollars per play). This in turn will enable thefiduciayy company to make appropriate payments to each recording companyand artists whose works have been played over tile air.Cost

It is our estimate that once the first three months of measurement is completedand the various technical problems and "bugs" have been worked out, such anon-going audit could.be conducted at an annual rate of approximately $500,000If the data collectioli method is on-air monitoring, and approximately $300,000if the method Involved Is station logs. During the first year, however, becauseof the initial three month "shake down cruise," these annual costs would be In-

I Possibly the Uniform Product Code numbet;

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creased by about 20 percent. These cost estimates provide for all measurementcosts through delivery of the printout to the fiduciary company, but do notprovide for the subsequent work of the fiduciary company.Conclusion

Twenty thousand time segments per year spread uniformly over the 365 daysof the year, the 24 hours of the day, and 100 sampling points throughout thecountry will form the basis for determining public performances of recordings.Since something on the order of 75 percent of these segments will be music seg-ments and since something like two and a half recordings on average will becontained in a ten minute segment, a total of approximately 50,000 recordingsplayed will form the basis of the measurement if on-air monitoring wereused; approximately 300,000 recordings played will form the basis if stationlogs are used. Each of these numbers is far in excess of the number of "subjects"employed in a normal opinion research survey or poll. '

There are various other ways that a sample representing the extent to whichrecordings are heard over radio stations by the nation's population could beselected-with equal validity. We have suggested the particular method outlinedhere because of the existence of our 100 point national sample and our accessto experienced, trained and reliable interviewers in those sampling points. Thisdesign would accomplish the desired result as effectively as any other we knowand more efficiently than any other that our organization could implement-with a minimum of the "royalty pot" being diverted from royalty payments tomeasurement costs.

Burns W. Roper, Chairman of the Board of The Roper Organization Inc.,One Park Avenue, New York, New York 10016, has been engaged In marketingand opinion research since 1946. He has directed marketing and opinion studies,legal evidence surveys, and public affairs and political polls for such diverseclients as American Broadcasting Co., The American Distilling Co., AmericanInstitute of Certified Public Accountants, the Associated Press, H&R Block,Columbia University, Commonwealth of Puerto Rico, Corporation for PublicBroadcasting, Exxon Company, Girl Scouts of the U.S.A., Harvard University,Kaye Scholer Flerman Hays and Handler, McDonald's, Miller Brewing Co.,Mobil Oil Co., Philip Morris Inc., Plainview-Old Bethpage School District, Tele-vision Information Office, and Xerox Corp., among others.

He and one of his partners developed and are responsible for the implementa-tion of Roper Reports, a ten times a year public opinion research service sub-scribed to by approximately 50 leading business, governmental and other organi-zations. Roper Reports regularly explores public atttiudes on a whole host ofpolitical, social and economic issues on a trend measurement basis.

Mr. Roper has authored a number of articles, both for research and otherJournals and has made frequent appearances on both radio and television. Inaddition, he has served on a number of occasions as an expert witness in legalcases involving consumer research and public opinion.

He is a member of the Market Research Council (former President), theAmerican Marketing Association, the American Association for Public OpinionResearch (and a former member of its Executive Council), the National Coun-

-ell on Public Polls (Vice President). He is the Chairman of the Board of TheRoper Public Opinion Research Center. (The Center Is jointly hosted by Uni-versity of Connecticut, Williams College and Yale University and is not a partof The Roper Organization. It is the largest archive In the world of originalpublic opinion research data containing studies not only of The Roper Organiza-tion but of most other leading commercial, governmental and academic researchorganizations in this country and abroad.)

Mr. Roper is a member of the Board of Freedom House, a member of theBoard of The Environmental Fund, a member of the National Council of TheUnited Nations Association of The United States of America, a member of theCorporation for UNICEF, and a member of the National Institute of SocialSciences.

Mr. Roper, born February 26, 1925, in Creston. Iowa, attended Yale Universityand served as bomber pilot in the Eighth Air Force during World War IL Heis married to Helen Lanagan Roper and is the father of four children-Bruce,David, Douglas and Candace.

I Typically 1,500 to 2,000.